Singapore Business Review reported that the firm attributed the faster pace of growth to the residential buildings sector, which it forecasts will grow in real terms by 3.2 percent in 2019 and 1.5 percent in 2020.
Fitch Solutions revealed that around $9 billion worth of residential building contracts, both from the public and private sector, were awarded last year, way higher than the $4.8 billion worth of industrial and commercial contracts awarded during the same period.
“In the public residential sector, the government has been consistently launching new build-to-order (BTO) projects, with six projects already launched in H1 2019 and another five more scheduled for launch by the end of the year,” it said.
After 11 quarter of decline in the number of residential units planned and under construction, the private residential sector finally saw a rebound in Q4 2017.
The residential sector is projected to receive a boost in growth over the coming months as the planned projects, particularly those from last year, are expected to start construction this year.
Fitch Solutions, however, made a downward revision for the 2020 growth – from 2.6 percent to 2.3 percent – as it observed a slight decline in the number of newly planned residential units in Q1 2019 as well as the taking effect of the latest cooling measures.
“In 2018, the government raised the Additional Buyer’s Stamp Duty (ABSD) and tightened loan-to-value (LTV) limits on residential property purchases, and we anticipate a drop in demand as a result of these measures, which will slow down the pace of the rollout of property development projects from 2019 onwards.”
The firm noted that risks of growth are heavily tilted to the downside, “due the ongoing US-China trade dispute contributing to external headwinds to growth of Singapore’s economy, as well as uncertainty in global markets in general”.
“A recession in the US will have global implications, including a slowdown in trade activity which will affect the growth of the Singapore economy. Hence, fears of an impending slowdown may further suppress demand for residential build,” it explained.
It also underscored that an early indication of a potential slowdown in the residential buildings sector’s growth can be seen from data released by the Monetary Authority of Singapore.
While the total amount of housing and bridging loans had been rising steadily since January 2016, growth of such loans entered negative territory since January 2019.
“This is a possible signal that demand for housing is waning, a phenomenon likely linked to the effects of property cooling measures, as well as fears of recession,” said Fitch Solutions.
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