50,526 units – this is the estimated supply of new homes that are available or could be released for sale over the next few years. They include homes that could be generated from government land sales sites sold/expected to be sold up until the 2H2018 programme, as well as all private sites sold (including collective sales sites) up until the end of June 2018.

The market today is well-placed to see the launches of these unsold units being paced out over the next four to five years, instead of bunching up in the coming two years. Here's why:

Developers have five years to sell all the units on each site to avoid the clawing back of the additional buyer stamp duty on the purchase of the land. 

It is in the interest of developers not to flood the market with more units than it can absorb to curb downward pressure on pricing which would jeopardise their subsequent launches/projects down the line.
Most developers have become highly diversified geographically and across asset classes. This reduces their reliance on a single market and single asset class for revenue and cash flow at any one point in time and provides them with the agility to time the sale launches of their projects in accordance to demand.

Large sites are good candidates for phased out launches and there are many of them under development today. The phased-launches strategy for large sites enables developers to test market pricing and demand to maximise returns. In the current market cycle, there are at least sixteen collective sale sites sold since 2016 that could generate more than 500 homes each, including at least eight sites which could generate more than 1,000 homes each.

Assuming that developers pace out the launches of their projects over four years from acquisition, leaving the fifth year as a buffer to sell the remnant unsold inventory, the market could potentially be seeing an average annual launch supply of 12,632 units (50,526 units divided by 4 years) over the next four years.

This provides a comfortable buffer against the estimated annual new home demand of 10,566 -12,159 units. This is the range between what developers sold in 2017 (10,566 units), and what they sold on average over the last ten years (12,159 units).  

As properties are heterogeneous with no one property similar to another in terms of view, facing, layout, location within the development, etc, a supply buffer is needed to prevent panic purchases which can be triggered when buyers perceive choice units to be limited.

From the above analysis, it can be seen that if developers pace out launches sensitively, the market is not in danger of oversupply in spite of the additional cooling measures announced on 5 July 2018. However, whether developers can tap all of the demand available will depend on their pricing strategies as buyers remained price sensitive.

For more information on Singapore's private housing market phone or email Tay Huey Ying, Head of Research and Consultancy at JLL Singapore via the contact details listed below.

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