The IR effect on housing demand

Up to 75,000 new jobs could help to prop up market

HOMES for the masses have always been the backbone of Singapore’s residential market. And, with the two integrated resorts (IRs) expected to employ some 75,000 people, demand for such housing is likely to go up.

Both IRs are expected to draw a significant influx of “foreign talent”, simply because Singapore does not have enough people with the right skills for the various jobs that will be created.

When the IRs were first announced in 2005, the Government said that the IRs were expected to bring in about$5 billion of total investment and create 35,000 new jobs. Today, the impact is likely to be much larger, after the consortiums behind Marina Bay Sands and Genting Resorts World increased their investments to over $6 billion each.

Up to 75,000 new jobs are expected to be created, of which 30,000 will be from Marina Bay Sands and 45,000 from Genting Resorts World. This figure is more than half of the 140,000 people currently employed in the industry.

Over the past 12 to 18 months, the labour market saw record employment creation on the back of strong economic growth. With the unemployment standing at a low of 2 per cent (54,400 people), the need to attract foreign talent with the right set of skills has become a priority.

As few Singaporeans are trained in this area, it is likely that many of the vacancies would have to be filled by foreigners. Assuming 30 per cent of the jobs (some 23,000 of them) are taken up by locals and the remaining 70 per cent (52,000 jobs) by foreigners, this would generate a substantial demand for housing, especially in the rental market, and to a certain extent, the primary and secondary sales market.

It is estimated that around 44,000 resort workers will most likely reside in the lower tier of the housing market. Hence, it is clear that most of the demand would enter both the HDB, as well as the lower end of the mass private residential housing rental market, as these are more affordable.

According to the 2005 General Household Survey, the average household size is expected to be 3.7 persons. Assuming that five foreigners share one house, the minimum requirement would translate to 8,800 home between 2009 and 2010. The entrance of these foreigners would definitely have a very positive effect in all layers of the housing market.

Although the Urban Redevelopment Authority’s first quarter figures show that there were 14,862 vacant private residential units available in the market, we at Savills Singapore believe that they could include units from condominiums that had been sold en bloc and old apartments in unliveable conditions.

Hence, the current available private units could be as few as 7,500 units.

Moreover, the mass segment will see a moderate supply of only 8,400 units to be completed between 2008 and 2010. This modest supply, coupled with the strong demand in the rental market, is likely to boost homebuyers’ as well as investors’ confidence in the residential mass-market.

More jobs will be created not just from the effects of IRs, but also other ongoing mega-projects from Exxon Mobil and the soon-to-be-completed shopping malls, like ION Orchard, Orchard Central and Somerset Central. This, together with the Government’s efforts to attract foreign investment, will ensure the continued influx of foreigners, which will, in turn, help sustain rental demand, especially at lower tier of the housing market.

With so much potential, we believe that the demand for mass-market homes will remain strong in the coming months, barring any unforeseen circumstances that could rock the global economy.

Ku Swee Yong, director of marketing and business development at Savills Singapore
Jane Kwa, senior research and consultancy analyst at Savills Singapore

Source : Today – 17 Jul 2008

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