Take a look at the schedule of completion from 2012 - 2015. The report is from Standard Chartered Bank. If you check out Sing Stats, the average population growth is around 100,000 per year. During periods of recession, there is zero growth in population, presumably because the organic growth in population is more than offset by departures of expatriates. In periods of strong economic growth, population growth actually hits 200,000.
Now again, from Sing Stats, the average person per household is 3.5. 100,000 divide by 3.5 is 28,571 new homes needed per year. In economic boom times, if population growth hits 200,000, the demand is 57,143 new homes. Now if you compare it against the supply, it could easily mop up the peak supply in 2015.
Let's look at the various scenarios:
2012: weak economic growth of 3 - 5%. Population growth 75,000. Demand for new homes 21,429. Supply of 20,000 just meets demand. Home prices will probably plateau.
2013: Best case scenario: Strong recovery because of zero interest rates in the west, rebound of China's GDP. Singapore's GDP hits 5 - 10%. Population growth 125,000. Demand for new homes = 35,714. Supply again meets demand. Home prices in the best case scenario will not rise at all.
Worst case scenario: Recession. West needs to balance their budgets. China's real estate continues to fall. GDP of China hits 7.5% as it adjusts its model. Population growth 25,000. Demand = 7,143. Big drop in property prices of maybe 10 - 20%.
2013: at best flat growth in prices. At worst a big drop.
Now will 2014 be a better year? Let's see:
2014: if we follow the best case scenario in 2013, then 2014 will be a slowdown back to 0 - 5% because the west will start to hike interest rates. Population growth 50,000. Demand = 14,286. Supply 40,900. It will still be a whopping drop in prices to the tune of 15 - 25% in 2014.
If we follow the worst case scenario in 2013, then 2014 will be a slow recovery after the crash. But interest rates in the west will still rise. Economic growth will revert to 3- 6%. Population growth 75,000. Demand for new homes 21,429. Supply 40,900. It will still be another drop of 10 - 20%. That means the combined drop from 2013 to 2014 will be between 20 - 40%.
2015. Things could get better but let's see the supply. It's 47,000.
If we follow the path from 2014's best case scenario, then 2015 will be a mild recovery. Population growth 50,000. Demand 14,286. It will still be another drop of 20-30%. So the combined drop would have been between 35 - 65%. That's very drastic indeed.
If we follow the path from 2014's worst case scenario, then 2015 could be a stronger recovery. Population growth could be 150,000. Demand could hit 42,857. The drop could be between 0 - 10%. The combined drop following the second path could be 20 - 50%.
2016: Things start to pick up.
If you expect normalisation of economic growth in both paths, then population growth could revert to 100,000. That meant 28,571 demand. Interestingly, it is still an over supply because 31,000 will be completed. Prices could stay flat.
2017 - 2020. The population in 2011 was 5.2m. Assuming it grows by 100,000 per year on average, by 2019, it will hit 6 million! From thereon, how much more will Singapore's population grow? It might drop to 75,000 per year, because even at such a rate, in 13 years, we would have reached the physical limit of 7 million by 2032! The demand from 2019 onwards will drop to 21,429 new homes!
Singapore can renew itself and alleviate partially the ageing of its population by using the Iskandar region as an attractive destination for retirement, housing of workers of companies that have outsourced to that area. The population can be kept younger and the dependancy ratio lowered this way.
2020 onwards will be more challenging for Singapore's property market. There will be demographical and physical constraints. But that's another story altogether.
