Home vacancies to rise by 14% in 2015

Oversupply of private homes intensify as URA raised estimates of completed homes, says CIMB.

URA’s 2Q12 data shows growth in private home prices and flat qoq rents with the demand for small units subsiding, though physical prices were still at record highs.

According to CIMB, near term, demand will likely chase supply as 2012 is on track for a record year of volumes.

As the chart above shows, pipeline supply rose and physical completions for 2013-15 were raised in 2Q12 to 13.8K units.

As such, CIMB expects supply pressures to intensify.

"As population growth lags completions, we expect vacancy to rise from 6.8% in 1H12 to 14% in 2015 (10-year average: 8%).

Here's more from CIMB:

In URA’s 2Q12 data, PPI inched up by 0.4% qoq with price growth Outside Central Region (OCR) slowing. Rent growth eased to +2% qoq from +5% in 1Q, led by Core Central Region (CCR).

There was unsold inventory from launched projects and private units in the pipeline. Physical-completion
estimates were raised for 2013/15.

Resale volumes rebounded. HDB resale price growth was back up to 1.3% qoq (1Q12: +0.6% qoq) while
median COVs were mixed at -10/+10% qoq after two quarters of decline.

There were signs of moderation as increased take-up caught up with completions. Vacancy rates thus held
steady at 6.8% for non-landed units, but we expect this figure to rise with higher physical completions and
more unsold units/pipeline supply. 

We see flattening rents limiting further upside for record home prices. HDB resale and median COVs should bottom out, as 25k units are released this year. We see subsiding risks of further measures if prices start to moderate.

Demand for small units also appeared to moderate in 2Q12, a small positive.