An oversupply of apartments threatens to push down Singapore property prices, the city-state’s central bank said.
The number of unsold units from new projects doubled to 4,377 in the third quarter, the Monetary Authority of Singapore (MAS) said in its annual Financial Stability Review released yesterday.
The overhang will probably “be exacerbated in the medium term” as developers launch projects from a slew of redevelopment or “en-bloc” deals struck in the past two years, MAS said.
“The increase in the unsold inventory could place downward pressure on prices in the medium term, if unaccompanied by a corresponding rise in demand,” it said.
While residential property prices declined after the government imposed a fresh round of property curbs in July last year, they have started to creep up again, gaining 1.3 percent last quarter.
The Singaporean Urban Redevelopment Authority said there were 50,964 uncompleted private residential units in the pipeline at the end of last quarter, up from 50,674 units in the previous quarter.
MAS also warned people to be cautious, given an uncertain economic outlook and weaker labor market could affect household incomes and demand for property.
“Given these downside risks, prospective buyers should be mindful of risks and remain prudent before entering into long-term decisions, for instance buying a property, taking on a mortgage, and servicing that mortgage,” the report said.
MAS warned of risks to banks’ profits and foreign-currency funding stemming from a slowing global economy and increasingly uncertain outlook.
While the nation’s banking system remains healthy and lenders continue to have “ample capital and liquidity buffers,” low interest rates and slowing credit growth could squeeze profit margins, it said.
Banks must “be vigilant” to pressures on their foreign-currency liquidity positions, it added.
Citing liquidity stress tests conducted with the IMF, MAS said that banks could struggle to convert their excess Singapore dollars into foreign currencies in the event of “severe dislocations” in the swap market.
It also said that bad-loan ratios have remained “broadly stable.”
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