IMPACT OF ECONOMIC CONDITION ON THE TREND OF CONDOMINIUM DEVELOPMENT

Abstract

The Price of condominium housing in Singapore has been escalating from height to height since 1990. No sign of softening in prices is shown so far even though potential supply has exceeded the historical demand. This led to the belief that condominium housing is an unusual economic good that when prices increase demand increases for fear of further surge in price. However, the continuing trend of the rapid surge in prices may not be sustainable in long run. In the analysis of the trend of condominium development undertaken in this study, it is found that demand of condominiums has been strong for the past few years mainly due to the strong economic fundamental. Supply is to a large extent demand led. Supply of condominiums increased extensively in recent years to catch up with strong demand. The general optimistic outlook of developers regarding the future demand leads to record high in the supply of condominiums. The bulk of the supply of condominiums is expected in year 1996 and 1997 where more than 12,000 units will be ready for occupancy. Based on the forecast for demand carried out in this study utilising Times Series Analysis, it has been found that demand for condominiums is likely to stabilise at approximately 1,600 units per annum. In the absence of strong external factors to stimulate demand, the oversupply is likely to happen in two to three years time. To sum up, if the volume of supply for condominiums keeps increasing to a level where the market cannot absorb, oversupply is inevitable. This implies that the continuous upward trend of condominium price is not sustainable in the long term judging at the forces of demand and supply.