13 Dec 2022
Unsold private housing stock hits 15-year low, what's the effect on prices in 2023?
Stock of unsold private housing under construction has been decreasing for 9 straight quarters hitting a 15-year low and is not expected to increase in the coming year.
Prices for private housing will likely remain elevated in 2023 due to strong housing demand and high land & construction costs.
Based on data compiled by ERA Research and Consultancy, the stock of unsold private housing units has been on the decline from Q2 2020 to Q3 2022 (2 years & 3 months). This represents the longest period of consecutive quarters of declining stock since such data was made available by Urban Redevelopment Authority from Q2 1998.
When there is weak home-buying demand and high level of unsold units, there will be downward pressure on property prices. This has happened during the Asian Financial Crisis of 1998. However in today's market, there is strong home-buying demand and low number of unsold housing units, this will result in a upward pressure on property prices.
From Q2 2020 to Q3 2022, private residential property price index rose 23.1% as developers' supply of unsold units fell from 20,919 to 5,320 units.
Despite 2 rounds of property market cooling measures in the past 12 months, residential housing prices have not fallen. Given that developers' inventory of unsold housing units is diminishing in the face of strong demand, prices are unlikely to fall in the near future.
Since the COVID-19 pandemic, condominium constructions costs have risen 22% according to construction and property consultancy Rider Levett Bucknall. Furthermore, higher interest rates have led to higher land acquisition and property development financing costs for the developers.
We can also observe that developers are not actively acquiring residential development land to replenish their diminishing inventory of housing units due to current economic uncertainties and are also waiting to assess the impact of the latest round of property cooling measures. Hence, we can expect that the inventory of unsold housing units will not rise in the near future.
Future Residential Launches (as at 30 Nov 2022)
The information provided in this article is for informational purposes only and is not intended to replace professional advice. No responsibility or liability is assumed for any decision taken or action taken in reliance on the information in this article. Any reliance on the information provided in this article is at the reader's own risk.