A report by Citigroup said that the shortage in residential property supply is likely to worsen despite government assurances of sufficient supply over the next few years.
This is because the number of units completed from 2007 to 2010 will likely fall short of the 42,200 homes forecast by URA.
The Citigroup report pointed out that completion rates have been consistently over-estimated in the past with units under construction far lagging completion estimate. Moreover, there may be a higher risk of delays in completions due to shortage of construction materials and workers.
Only 25,100 homes are to be built from 2007 to 2010, out of which only 4,573 units are under construction in 2007 and 6,633 in 2008.
On the contrary, jobs growth and foreign worker inflow continue to outstrip supply of new homes. About half of the new jobs created in 2007 which number about 176,000 jobs went to foreigners. Accommodating the current flow of foreign workers will deplete the current supply of residential units.
En bloc sales will aggravate the shortage in supply of homes and it may prompt the government to come up with more policy measures.
However, the government will likely favour supply side measures, including more land supply, more HDB flats and further relaxation of measures on rental of HDB properties. However, demand-side measures are still possible if price increases continue unchecked and speculation begins to test the patience of the authorities.
Citigroup remains positive about the fundamentals for property because demand and supply dynamics continue to favour rental and capital growth for both the office and residential sectors.