Land sales tweaked to ensure smoother supply

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Published March 9, 2010

Land sales tweaked to ensure smoother supply

Changes made to reserve list system make it easier for developers to trigger sites for sale

By UMA SHANKARI


(SINGAPORE) The government has tweaked its bi-annual land sales programme to make land supply more responsive to market demand.

Three changes have been made to the reserve list system, National Development Minister Mah Bow Tan said in Parliament.

He added that the government does not intend to introduce more measures to curb speculation at the moment.

'We don't intend to introduce more measures for now, but we will monitor the market closely. If there are signs that the market will overheat again, we are ready to introduce additional measures to stabilise the market.'

The second-half 2010 government land sales programme will have a 'larger supply and wider variety of sites' on the reserve list to give developers more choices.

The Ministry of National Development (MND) will also now consider releasing a site on the reserve list for sale once it has received 'sufficient market interest' - that is, if two or more developers submit minimum bids that are close to the government's reserve price for the site within a reasonable period.

Right now, a site is only released for sale if a developer submits a minimum bid that matches or exceeds an undisclosed reserve price set by the government.

The deposit due from applicants of reserve list sites will also be reduced from 5 per cent of the minimum bid price to 3 per cent, capped at $5 million. The reduced deposit is expected to lower upfront costs to developers and reduce their cashflow burden when they trigger sites on the reserve list.

Developers welcomed the increase in future supply.

'I think that the changes are a good sign,' said MCL Land chief executive Koh Teck Chuan. 'The government probably felt that they needed to balance the demand (for land sites) with more supply.'

He hopes that the increase in supply could moderate the aggressive bidding by developers seen for recent state land tenders.

The Real Estate Developers' Association of Singapore (Redas) said that it welcomes the improvements made to the reserve list system. 'These measures (the lower deposit and the release of sites as and when there is sufficient market interest) will help minimise the cost burden on developers who trigger the sites for sale and make the reserve list system more responsive as a whole to market conditions.'

Redas president Simon Cheong warned last month that many developers are now facing depleting landbanks following brisk home sales in recent months. Developers, he said, were surprised at the speed of the recovery in the property market and are looking forward to sites in the confirmed list to replenish their landbanks.

The changes announced yesterday could also be aimed at keeping private home prices affordable, analysts said.

'We believe that these measures are being introduced so as to enhance flexibility in the land sale system as well as to try and increase affordability in the mass-market private housing market,' DBS Group Research analyst Adrian Chua said.

But he noted that while the land bidding process may become less competitive, the impact on land prices may be marginal in a buoyant market.

Others similarly said that if the government's intention is to check land prices - and also check climbing private home prices - increasing future supply is unlikely to have much of an impact now.

'Developers are still going to bid aggressively because they want their sites now,' said Colin Tan, Chesterton Suntec International research and consultancy director. He said that the government should consider releasing two or three sites at a go as this will have a bigger impact.

Colliers director for research and advisory Tay Huey Ying said that new sites on the H2 2010 land sales programme could include plots in newer towns and with no particular MRT advantage.

'As prices of mass-market home in prime mass-market locales or near MRT stations are near peak, the market has been urging the government to release more affordable mass-market sites to the meet demand by upgraders,' Ms Tay said.

The tweaks come a month after the Economic Strategies Committee recommended a review of and improvements to the reserve list system to make it less onerous for developers to trigger sites on the list.

Mr Mah also said that the government would progressively release sites at new growth areas in Jurong Gateway, Paya Lebar Central and Kallang Riverside for development from this year. Several government agencies will also be relocated out of the central area to Jurong Gateway and Paya Lebar Central to catalyse growth there.

MND and two of its statutory boards, Agri-Food & Veterinary Authority of Singapore and the Building & Construction Authority, will move to Jurong Gateway by 2015. They will be joined by the Ministry of the Environment and Water Resources and its statutory boards PUB and National Environment Agency.

Elsewhere, the Singapore Workforce Development Agency will move to Paya Lebar Central. Its new continuing education and training campus, due to be completed by the end of 2013, will also be located there.

'The relocation of government agencies will free up prime office space in the city to meet private sector demand, as, by 2015, the current supply of about one million square metres of office space in the pipeline should have been taken up,' Mr Mah said.

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Mar 9, 2010

Govt keeping tabs on home prices

Reserve list system tweaked to make land supply flexible

By Jessica Cheam


THE Government will not introduce more measures relating to the property market for now, but will monitor the market closely, said National Development Minister Mah Bow Tan yesterday.

This follows a string of measures aimed at cooling both the private and HDB property markets unveiled by the Government in the past two months.

But Mr Mah said that to address land supply concerns - and to increase flexibility - the Government is tweaking one of the methods used to release new land sites, and will make more land available to developers.

He announced the move in Parliament during the Committee of Supply debate, as he fielded questions from several MPs on the health of the real estate sector.

Dr Amy Khor, MP for Hong Kah GRC, said complaints aired by buyers in recent months - on rising property prices and project sellouts - are 'symptomatic of short-term dislocations between the housing market and the overall economy'.

'If overall economic growth and property prices continue to diverge for a prolonged period, we run the risk of blowing a real estate bubble,' she said.

Mr Mah said the Government had acted quickly to pre-empt such a scenario by introducing measures to cool the market.

Last month it said a property buyer now has to pay extra stamp duty if he sells a property within a year. The proportion of the valuation price that buyers can borrow for home loans has also been cut.

Last September, the Government stopped allowing developers to absorb interest payments for homes under construction to deter speculative purchases.

When asked what other measures the Government would adopt to pre-empt runaway prices, Mr Mah said there would be no more measures for now. 'If there are signs that the market will overheat again, we are ready to introduce additional measures to stabilise the market.'

His comments are likely to come as a relief to an industry absorbing a slew of recent market-cooling measures.

Mr Mah recently also introduced new rules for the Housing Board (HDB) resale market: Buyers of non-subsidised HDB resale flats must now occupy their flats for at least three years before they can sell - up from 2.5 years or one year previously, depending on the financing.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said Mr Mah's assurance would give the market a breather to digest recent measures and see the impact.

Real Estate Developers' Association of Singapore (Redas) chief executive Steven Choo noted, however, that the Government's approach has not changed as it is still monitoring the market.

MP for Sembawang GRC Lim Wee Kiak asked what form future measures might take. Mr Mah replied: 'If I tell you, then there's no point having those other measures in place in our pockets.'

He also said the Government would ensure there was an adequate supply of land to support economic growth.

The Government is tweaking the Urban Redevelopment Authority's reserve site system in which sites are put out to tender if sufficient interest is shown.

With immediate effect, the deposit to be lodged by developers who trigger tenders under the reserve list will be cut from 5 per cent to 3 per cent of the minimum price, capped at $5 million.

The reserve list system offers sites on top of those on the confirmed list, which are tendered according to a set schedule.

The reduced deposit will help lower upfront costs and the cashflow burdens of developers, URA said.

Mr Mah also said the Government would consider releasing a reserve list site for sale immediately if more than one bidder submitted a price close to the Government's reserve price.

Previously, a site was released for sale only if a developer's submitted bid matched or exceeded the reserve price.

The Government will also offer a larger supply and wider variety of sites in the reserve list in the second half of the year to give developers more choice.

Details will be announced by June.

Industry observers said the tweaks could further cool the booming property market.

Mr Colin Tan, director of property consultancy Chesterton International, suggested however that the Government consider selling two or three sites at the same time to temper developers' bids - which have been aggressive in recent months as competition for land heats up as they seek to replenish their land banks.

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Mar 9, 2010

budget debate

Let market forces decide prices and sizes of homes


SHOULD the Government do something about 'Mickey Mouse-size' apartments that are all the rage now?

No, said National Development Minister Mah Bow Tan yesterday, reiterating that market forces should continue to determine the prices and sizes of homes that will be developed.

He was responding to concerns raised by Dr Amy Khor (Hong Kah GRC) about the proliferation of such small units in Singapore.

'Profit-maximising developers want to push per square foot (psf) prices of every unit up,' she noted.

'The way to do so without hurting sales is to reduce unit sizes to make them more affordable on a lump sum basis.'

She also warned that such high psf prices could influence buyers in the highly sentiment-driven market and give the perception that property prices are experiencing steep price rises.

She gave the example of Siglap V, a new development comprising small units in the east, where headline prices hit $1,634 psf recently.

There is no market data on the number of these small apartments, but some projects such as Suites@Guillemard have offered units as small as 258 sq ft.

In response, Mr Mah said that 'beyond ensuring market stability, we should let market forces determine prices and the type of unit sizes that will be developed'.

But he agreed that headline prices of these units 'are indeed misleading', and suggested that 'we do more to educate consumers not to take such headlines at face value'.

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Mar 10, 2010

Might housing buffer stock be an answer?


THE debate in Parliament on state housing saw a number of popular assumptions disproved by National Development Minister Mah Bow Tan. He showed, with figures, that purchases of resale flats by private property owners and immigrants were too few to have contributed to a price spike in the past year. As for the charge that 'too many' owners were living off the Housing Board by subletting while they camped in with relatives, the fact was that only 3 per cent of eligible owners did so. On persistent complaints that even first-time bidders were unsuccessful after the 'umpteenth' try, the truth was that there were umpteen rejections by finicky applicants who were also selective with the facts.

The minister's responses should eliminate the unproductive aspects of the debate. Energy should properly be focused on refining stability of supply so as to avoid famine-and-feast situations that exacerbate impressions of flawed planning. Buyers are certain supply has been short. How else to explain the price spurt? Mr Mah explained that 25,000 flats would have been made available between last year and the end of this year. High application rates and multiple rejections by applicants, as he has often noted, mask the truth. Such back-and-forth can lead to a dead end. A practical approach might be to shorten the waiting period by making supply less time-inelastic. The build-to-order (BTO) scheme adjudged as the most efficient in meeting demand typically takes four years to complete, from the taking of bookings to occupation. Shaving off a year, or two if feasible, will remove much buyer angst. The Government campaign to steer the construction industry towards less labour-intensive methods, by using pre-cast components and modern processes, is a nice fit in this regard.

There was an overhang of 31,000 unsold flats following the 1997-98 Asian currency collapse. It took a decade to clear that. Pent-up demand after the Sars period and the 2008 banking meltdown created what now appears to be a supply shortfall. The experience of the dead-weight surplus should not discourage the HDB from holding an adequate buffer stock of flats to meet unforeseen demand spikes. Last year, there were about 2,000 surplus flats left over from various schemes like buy-backs and unallocated BTO units. That was unplanned. A variable buffer stock could be considered, in addition to shortened building time. Holding costs will have to be taken into account when considering the feasibility of this approach, but it may be a price worth paying.