It all boils down to demand and supply

We need good data and solid reference points to navigate towards investment decisions. A good source of raw data, with solid data integrity and consistency of reporting, layered with reasonable assumptions, deep experience and objectively interpreted and analysed will mean the difference between a mediocre investment versus a wildly profitable one.

With several rounds of policy changes imposed on the residential sector within the last 12 months, more investors are asking “What new policies next?”, “Should we divest now?” and “Should we wait a year or two before investing?”

The market is directionless, with indicators pointing in opposing directions: Low holding costs versus low rental yields against a backdrop of prices for mass market residential setting records in Yio Chu Kang, Ang Mo Kio, Pasir Panjang, Pasir Ris, Serangoon, etc, where demand remains strong.

So, what numbers can guide us to a decision?

IPA’s work and discussions involve high-net-worth investors (who may be buyers or sellers at any one time), mortgage lenders, developers, construction firms, institutional funds, private equity players, funds who lend for project financing, equities analysts, etc. Our basis of discussions for the residential market relies heavily on data provided by several sources.

In Singapore, the bulk of raw data comes from official sources. Databases we rely on are: URA Realis, SISV-Realink (whose main data source is caveats filed with SLA), HDB’s announcements and SingStat for population growth, household formation and income.

In the private residential sector, market watchers are very focused on a few key data points:

1. Number of units sold by developers monthly and quarterly, by project

2. Monthly lowest, highest and median prices of each project sold by developers

3. Number of units sold in the primary, sub-sales and resale markets

4. Number of units launched and sold, number of units launched but unsold

Perhaps this is because the equities analysts require these data sets to gauge the financial health of the listed developers whose stocks they cover – and these analysts are the voices most often heard by financial investors.

The larger listed developers have “investor relations” personnel to liaise with analysts and fund managers. Healthy share-price performances are important for the market’s short term confidence in the developers’ financial strength and perhaps also allow the developers access to more favourable credit terms.

In fact, the same mentality applies to data for public housing: Analysts are focused on selling prices, COVs, BTOs, DBSSs, launch prices, how many units launched and sold, over-subscribed or not, etc. Few enquire about the net new supply of HDB flats, which is the new supply minus the demolitions due to the Selective En Bloc Redevelopment Scheme (Sers) and other upgrading programmes.

So, which are the data sets that would form a solid basis and reference for a direct real estate investor’s decision making?

None of the above data sets matters as much as rentals, vacancies and real physical demand and supply. Forecasting future rentals and vacancies depends on our view of future demand – physical demand from home users, as opposed to demand based on buy-sell transactions.

Projecting future demand is about as easy as reading tea leaves and cloud patterns. However, we have a lot more certainty when it comes to predicting supply. We can be especially confident about supply that is coming in the next three years as many of the “under construction” condominiums can be completed within 36 months.


When vacancies are dropping and rentals are climbing fast, we can safely predict that property prices will move up. This was the case in 2006-2008, when tenants were at the mercy of landlords when it was time to renew their leases.

With hindsight, we see that the population increase over the two years of 2005-2006 was about 235,000 (see table).

Assuming the new population growth is based on households of four, we would require about 59,000 residential units. The net new supply in 2005 and 2006 was 17,000 residential units. Therefore, we can safely assume that a portion of the new population moved in to take up the vacant units (which at that time was about 7-8 per cent) while others moved in with friends and relatives or sought accommodation in hostels and serviced apartments.

The story continued through 2007 into 2008, when the physical demand for residential units skyrocketed due to the inflow of 438,000 into our population in 2007 and 2008. That period also saw many en bloc sales and HDB SERS projects, followed by demolitions such that the net new supply of residential units was only about 13,000 units.

Now, squeezing 438,000 newcomers into 13,000 new private residential and HDB units is not simple. Vacancies have dropped to around 5 per cent (there is a structural persistent vacancy of around 1 per cent which are apartments or houses which are not in usable condition or are intended for demolition).

Therefore, lesson here is: We need to keep a close tab on physical supply completions.

By Ku Swee Yong, founder of real estate agency International Property Advisor.

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