Published November 3, 2010
Behind those gyrating home supply estimates
As projected supply of homes fluctuates, URA says it's based on developer inputs
By UMA SHANKARI
(SINGAPORE) A recent presentation on the estimated supply of private housing units in the pipeline has reignited the debate about the accuracy of official estimates.
Take, for example, the projected supply of private homes due to be completed in 2010. In the URA's Q1 2006 publication, the agency said 6,115 units would be completed in 2010. But over the next several quarters, the number grew steadily and, by Q3 2007, it was estimated that up to 21,451 units would be completed in 2010 - a climb of 251 per cent in the forecast over just 18 months.
And when market sentiment dipped in 2008, the numbers were revised downwards. Anticipated completions for 2010 plunged to a low of 5,394 units in Q2 2009 - down 75 per cent over 21 months - before climbing again to 10,536 in Q3 2010.
IPA chief executive Ku Swee Yong, who made the presentation at a luncheon hosted by the Real Estate Developers' Association of Singapore (Redas), said the fluctuation in the projected supply for 2010 was especially pronounced.
'The estimates for 2010 were first published in Q1 2006. And since we were four-and-a-half years away from 2010, we would be right to expect that most developers would not have planned for projects so far ahead yet,' Mr Ku said. 'However, from 2009 onwards, as we progressed to within 12-24 months from the end of 2010, the completion numbers should have become more and more precise.'
But this was not the case, he said. In Q3 2009, URA's publication said just 5,737 units would be completed in 2010; in Q4 2009, the figure was 7,584.
In its latest (Q3 2010) publication, URA said 10,536 private homes would be completed this year. More than 8,300 units have already been completed in the first three quarters.
Mr Ku added: 'If some investors had made a decision to buy, thinking the supply (for 2010) was lower than the historical average (of 8,000 units), they could have since decided that they had made a wrong decision. They may find it tougher to get tenants due to the high number of new units that are being completed this year.'
In response to a query from The Business Times, URA said the estimated supply of private housing units in the pipeline is computed based on the expected completion dates of projects with planning approval (either provisional permission or written permission), which is obtained through URA's quarterly survey of developers.
'The expected completion dates of projects are estimated by the developers, and not projected by URA,' said a URA spokesman. 'The progress of the construction of various projects may be faster or slower than earlier estimated by the developers, who may revise the expected completion dates of their projects.
'New projects which are issued with planning approval every quarter may also be added on. Similarly, projects for which planning approvals lapsed in the reference quarter are removed.
'As a result, the estimated supply of new units that are expected to be completed over the next few years may change every quarter.'
The spokesman added that as the pipeline supply figures are published every quarter, the market is regularly updated of the changes, if any, so that they can make informed decisions.
Mr Ku likewise said that the estimated completion numbers for 2010, 2011 and 2012 probably fell sharply during URA's 2008 publications as developers' sentiment nosedived.
But analysts said that what is cause for concern now is that there are no pipeline figures for 2011 and 2012 that can be taken to be reasonably accurate - at a time when the sentiment in the real estate market is uncertain and more government measures to cool the property market could be on the horizon.
BT understands that the Ministry of National Development (MND) takes into consideration the pipeline supply when it plans its half-yearly government land sales (GLS) programme.
Analysts BT spoke to said they use URA's estimated supply of private housing units in the pipeline as a 'base' to arrive at their own projections, which often vary significantly from those provided through official channels.
Market consensus is that as the end of 2010 approaches, Singapore can expect another climb in the number of expected completions for both 2011 and 2012.
The estimated supply of private homes due to be completed in 2011 has already fluctuated greatly since end-2006. In Q4 2006, URA said 5,876 new private homes would be completed in 2011. The estimate rose to 20,492 in Q1 2008 before dropping sharply to 9,196 in Q4 2009. In Q3 this year, an estimated 6,766 homes were expected to be completed in 2011.
Source: http://www.businesstimes.com.sg/
