Real estate market in Singapore faces a downward slump

The Monetary Authority of Singapore blames the growing number of unsold units, as well as the unpredictable economy

View of Singapore CBD from the Jubilee Bridge. DaltonLim/Shutterstock

The property market in Singapore could face risks because of the large supply of unsold units and the unpredictable economy, reported Channel News Asia.

In their yearly Financial Stability Review, the Monetary Authority of Singapore (MAS) advised potential buyers to exercise prudence when it comes to property investments. They also urged real estate companies who have high levels of leverage and have accumulated unsold inventory to be more mindful.

“Ongoing uncertainties in the economic outlook and a softening labour market could negatively affect households’ incomes and their demand for property,” explained MAS.

The hiring sentiment has already shifted because of the growth slump, providing fewer employment opportunities compared to the number of unemployed. The report also revealed that more workers are now being placed on temporary layoff and short work-weeks, despite the low retrenchments.

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“Amid the possibility of an extended period of sluggish GDP growth, wage increases are expected to ease, which could weaken households’ debt servicing ability,” added MAS.

The report also indicated an influx of housing units coming, even with the build-up of unsold units. During the third quarter, unsold units for launched projects, excluding executive condominiums, multiplied to about 4,377 units, compared to 2,172 units in the same quarter the previous year.

The central bank said the growth will worsen in the medium term, as developers launch projects sold between 2017 and 2018. With more unsold inventory, it could put “downward pressure on prices in the medium term, if unaccompanied by a corresponding rise in demand.”