July 5, 2007

Another reality check

NATIONAL Development Minister Mah Bow Tan has made possibly the most significant property market-stabilising remark to date - on land-use intensity. He could as well have said: 'Read my lips, no new plot ratios.' The disclaimer made in media interviews last week, that the Government had no imminent plans to raise the building ratio of land plots, was pegged specifically to the new Master Plan on national physical development due to be updated next year. There had been expectations raised in property circles that plot ratios would have to be increased gradually, beginning about now, to take account of the new population-planning target of 6.5 million inhabitants by around mid-century. As the minister took care to explain, there is enough land to accommodate normal population growth in the next 10 to 15 years '...and some of the land we have is not built up to full intensity under today's intensity'.

Mr Mah was basically talking of the medium term. But any developer and real estate watcher worth his salt, and any individual agonising over a buy-or-sell decision, would be remiss in not taking the comment as yet another government attempt to moderate - 'stabilise' might be a neutral description - current fevered price movements. Are they absorbing the market vibes? It appears not much - to go by realtors' excitable predictions about the price curve by year-end, after release this week of the Urban Redevelopment Authority's second-quarter price data. But consider the rush of stabilisation measures in recent months: more precise price data, sorted by region ranging from prime to the suburbs; the release of more land parcels for sale, including land for executive condominiums; the Law Ministry's study of collective-sale procedures to eliminate hitherto unknown shortcomings that undermine the rights of minority parties, which in turn could bring the whole business into disrepute. Developers are now also under instructions by the URA to give detailed information on a range of transacted prices. This is a necessary antidote to the trade's propensity to proclaim rising 'benchmark' psf prices while hiding less sexy numbers.

Of particular concern is the rash of en bloc sales. There have been some 70 deals in the half-year, with a value of about $9 billion. A record in the making, the trade happily reports. But the negative effects of lease apartments being voided and the pressure this places on supply and rents are being examined. When will the tipping point be reached? Developers and realtors are pumped up, but the pronouncement on plot ratios staying constant for now should set them thinking.