Results 1 to 6 of 6

Thread: Govt rebuts Cheong's 'free market' theory

  1. #1
    mr funny is offline Any complaints please PM me
    Join Date
    May 2006
    Posts
    8,129

    Default Govt rebuts Cheong's 'free market' theory

    http://www.businesstimes.com.sg/sub/...78367,00.html?

    Published March 25, 2010

    Let private property fly free, urges Simon Cheong

    Redas chief says state intervention on supply side not always helpful

    By UMA SHANKARI


    (SINGAPORE) The president of the Real Estate Developers' Association of Singapore (Redas), Simon Cheong, came out strongly yesterday to say the government should allow the property market here to operate fully as a free market.

    Mr Cheong, who was speaking at the launch of a new price index for private homes in Singapore, also asked if the state should be so concerned with private housing prices when the segment serves only 16.5 per cent of the overall population.

    Mr Cheong, who is also chief executive of SC Global Developments, said that he was commenting on the market despite being personally advised not to do so for fear of it being a 'sensitive topic'.

    'But, on balance, in the interest of Singapore's property market, I decided to do so,' he said. 'If Redas members who are fighting in the foxhole everyday for the interest of a healthier property market do not speak up, then who will?' Real estate developers in Singapore now have the unenviable task of having to step up their game very quickly to satisfy demand, he said.

    In Singapore, the government, which owns more than two-thirds of all land, controls the land supply. Land price here is largely determined by the reserve price system.

    'As the supply side of the development equation is managed by the public sector, market forces are often not wholly free to respond to demand,' Mr Cheong said.

    To illustrate his point, he highlighted the results of two recent government land tenders, which he said illustrated the 'conundrum and the dilemma developers face' when they bid for sites in the government land sales programme.

    A site in Tampines first put up for sale by the government in June 2008 was not sold after the sole bid of $118 per square foot per plot ratio (psf ppr) was rejected for failing to meet the reserve price.

    But earlier this month in another tender exercise, it was awarded to the top bidder at $421 psf ppr - 3.6 times the previous price.

    Similarly, a mixed-use site at Ten Mile Junction, which had a failed bid of $162 psf ppr back in April 2008, was awarded in February this year for $437 psf ppr.

    In both cases, the higher bid prices generated more revenue for state coffers but also accentuated the demand-supply mismatch.

    'With a higher land cost, these developers must now sell at higher prices just to maintain an equitable level of profitability.'

    Mr Cheong also questioned recent government measures designed to keep private housing affordable, such as the introduction of a stamp duty for sellers and the removal of the deferred payment and interest absorption schemes.

    While some felt private property was being priced out of their reach, he pointed out that it served only 16.5 per cent of the demography. 'Should it (the state) intervene to restrain the rise in property values to make private housing more affordable or should it be left to market forces?'

    Mr Cheong also said that a certain level of speculative activity in the marketplace can, in theory, improve the liquidity of real estate assets and catalyse the sales of new developments.

    When demand exceeds supply by a large margin, speculators provide investors with another source of a scarce commodity at a price premium. And encouraged by the higher prices, developers respond by launching more developments for sale and, in so doing, narrow the gap with demand, Mr Cheong added.

    He concluded his speech by pointing out that there are various factors that make real estate the preferred asset class in the near term, such as pent-up demand for mass-market housing and high liquidity, with some $301 billion of cash deposits in banks and another $67 billion of investible CPF funds reported last year.

    'Is it any wonder then that the recent measures to cool the private property market did not quench the thirst of genuine home buyers and investors - local and foreign alike - who clearly have strong confidence in the fundamentals of Singapore's real economy and its ascendancy as a global city in Asia?' he said.

    Mr Cheong added that he hopes that the launch of the new index will be 'a step towards improving market transparency and help lessen future needs for frequent market interventions, allowing a freer hand for market forces to work out its own genius'.

  2. #2
    mr funny is offline Any complaints please PM me
    Join Date
    May 2006
    Posts
    8,129

    Default

    http://www.straitstimes.com/PrimeNew...ry_506185.html

    Mar 25, 2010

    Redas chief on land supply, home prices


    THE Government has to shoulder some of the blame for the short supply of land and high property prices, said Mr Simon Cheong, president of the Real Estate Developers' Association of Singapore (Redas), yesterday.

    Mr Cheong told the audience at the launch of a new property price index that land values are largely determined by the Government's reserve price system that features in all state land tenders. Yet a site's reserve price is not revealed.

    'During periods of high volatility, it is not able to respond quickly enough to real-time changes happening in the marketplace,' he said.

    Mr Cheong, who is also chairman and chief executive of developer SC Global, picked out two recent government land tenders to illustrate the 'conundrum and the dilemma' developers face in bidding for such sites.

    A single bid for a Tampines site was rejected in June 2008 for being too low but was awarded in March at $421 per sq ft per plot ratio (psf ppr), or 3.6 times higher.

    A Ten Mile Junction mixed-use site also had a failed bid of $162 psf ppr in April 2008 but went for $437 psf ppr, or 2.7 times higher, in February.

    'Had the two sites (along with other tenders) been awarded back then at 'market prices', the current demand-supply mismatch scenario in the residential market may have been more smoothened and price increases for such mass market projects more muted overall,' said Mr Cheong.

    Such a blunt assessment of the supply situation and other factors driving the market buoyancy by a Redas chairman is unusual. Mr Cheong acknowledged as much, saying he had been advised to avoid commenting about the market for fear of it being a sensitive topic. He said public housing has become an important de facto driver of private property prices.

    A strong HDB resale market fuelled the ongoing upgrading process and it was the mass-market segment recovery - fuelled by demand from HDB upgraders - that has led the recovery in the general private residential market.

    He also addressed private housing affordability and asked whether the state should be so concerned about where private housing prices are heading when it serves only 16.5 per cent of the population.

    'Should it intervene to restrain the rise in property values to make private housing more affordable or should it be left to market forces?'

    Affordability is not only influenced by rising values. There is also short-term demand and available supply imbalances or too much credit expansion in the financial system, said Mr Cheong.

    'Someone who uses very little bank borrowings to buy and exit properties is not a speculator in the same sense as one who leverages aggressively... As we see it, buying what you cannot afford is speculation,' he added.

    Signs of heightened speculative activity were part of the reasons for the Government to introduce measures last September to cool the market. It came out with further steps in February.

    'But what or how much buying is considered excessive? Is it measured by volume, value or quantum? Should the market be left on its own to decide?' asked Mr Cheong.

    The continued buoyancy is caused by various factors such as high liquidity, the upsurge in population and foreign buying.

    The pent-up demand in the early phase of economic recovery in mass-market housing, for example, was interrupted by the global financial crisis and never ran its course in the last property cycle, he said.

    'Is it any wonder, then, that the recent measures to cool the private property market did not quench the appetite of genuine home buyers and investors?'

    Mr Cheong added that the new price index will hopefully be 'a step towards improving market transparency and help lessen future needs for frequent market interventions, allowing a freer hand for market forces to work out its own genius'.

    JOYCE TEO

  3. #3
    Join Date
    Nov 2008
    Posts
    197

    Default Let government control land sales

    When government controls land sale and holds back sale until prices rebound, the benefit of price increases go to all Singaporeans as the nation become richer.

    But when land is sold cheap to develpers then a few individuals make the money. Infact some developers will buy the land cheap and delay the launch until conditions recover.

  4. #4
    mr funny is offline Any complaints please PM me
    Join Date
    May 2006
    Posts
    8,129

    Default

    http://www.businesstimes.com.sg/sub/...33540,00.html?

    Published March 26, 2010

    Govt rebuts Cheong's 'free market' theory

    It rejects Redas chief's 'hands-off' plea, says it can't let private property bubbles form

    By UMA SHANKARI


    (SINGAPORE) The government yesterday defended its policy of managing price movements in the private housing market and also stood by its method of supplying developers with state land sites.

    It was responding to Wednesday's speech by the president of the Real Estate Developers' Association of Singapore (Redas), Simon Cheong, who said that the government should allow the private property market here to operate as a completely free market.

    Mr Cheong also questioned the need for government intervention to manage the rise of private home prices and asked if the state should be so concerned with private housing prices when the segment serves only 16.5 per cent of the overall population.

    His speech took some developers by surprise but most said that it was 'brave'. There was also broad agreement that the government should reveal the reserve price of each site it puts up for sale.

    The Ministry of National Development (MND) said it would 'like to respond to the key points he (Mr Cheong) raised'.

    'The government's objective is to maintain a steady and healthy property market where price movements are supported by economic fundamentals,' MND said in a statement. 'A property market bubble, if allowed to form, may not only impact housing affordability but also severely impact the economy when it bursts.'

    MND does this by making sure that there is an adequate supply of land to meet demand and by providing timely and comprehensive real estate information to the public.

    'When necessary, the government will also introduce measures to dampen market exuberance and prevent prices from running ahead of economic fundamentals,' MND added.

    The ministry has in recent months taken several steps to keep private housing affordable, including the introduction of a stamp duty for sellers and the removal of the deferred payment and interest absorption schemes.

    In his speech, Mr Cheong also cited two sites - one in Tampines and another at Ten Mile Junction - that were not awarded in 2008 after government land tenders as examples to illustrate how market forces were not allowed to act freely and were constrained by the reserve price system.

    Both sites were recently awarded in new tenders at much higher prices than the bids in 2008.

    Mr Cheong argued that if the government had awarded the sites at lower prices in 2008, it could have helped to moderate the recent hike in private home prices.

    But MND 'disagrees totally with his view'. Firstly, it is arguable if awarding the two sites at the low bid prices in 2008 would have moderated property prices, MND said. It could have instead simply allowed the bidders to achieve higher profit margins.

    MND also said that the potential yield from the two sites is small (around 800 units) compared to the total supply of 60,476 uncompleted private housing units from projects in the pipeline (as at Q4 2009) - of which 34,234 units are still unsold. It is 'questionable' whether the added supply of the two sites in 2008 would have affected prices today in any way, the ministry said.

    The reserve price also did not deter the successful sale of sites under the government land sales programme in 2008, MND pointed out. That year, seven residential sites which could yield a total of 2,464 units were sold through the confirmed list.

    The Tampines and Ten Mile Junction sites, which were released for sale through the confirmed list but not awarded, were among the few exceptions.

    MND added that a reserve price is necessary, as it is the government's duty as the custodian of state land to ensure it obtains a fair market price for a site. But the reserve price serves only as a guide, and is not a rigid formula for the government in deciding whether to award a sale site.

    Said MND: 'The government had awarded sale sites in the past even when the top bid was below the reserve price. However, for the two sites cited by Mr Cheong, the government was not convinced that the bids represented fair market value rather than opportunistic bids, as there were very few bids for the sites, and the bids were exceptionally low.'

    Developers BT spoke to said that MND's response was 'as expected'.

    'MND has always stuck to its line about maintaining a sustainable property market and so we didn't expect changes just because of his (Mr Cheong's) speech,' said the chief executive of a property group here.

    But while not everyone agreed with all parts of Mr Cheong's speech, most developers were in favour of asking the government to disclose the reserve price of each site it puts up for sale by tender.

    'For future tenders, if the reserve price is released, there won't be cases where bids come in under the minimum price,' said EL Development managing director Lim Yew Soon. 'By simply listing the reserve price, it makes the whole process easier.'

  5. #5
    mr funny is offline Any complaints please PM me
    Join Date
    May 2006
    Posts
    8,129

    Default

    http://www.straitstimes.com/STForum/...ry_506673.html

    Mar 26, 2010

    Why would developer sell low in buoyant market?


    I REFER to yesterday's report, 'Redas chief on land supply, home prices', where Mr Simon Cheong, president of the Real Estate Developers Association of Singapore (Redas), said the Government's reserve price system may have been responsible for current high property prices.

    Does Mr Cheong guarantee that the developer who bids low for a site and is awarded it will sell low in today's current buoyant market, so price increases will be muted?

    If there is no guarantee, then the developer will be laughing all the way to the bank.

    Khong Kiong Seng

  6. #6
    mr funny is offline Any complaints please PM me
    Join Date
    May 2006
    Posts
    8,129

    Default

    http://www.straitstimes.com/PrimeNew...ry_507073.html

    Mar 27, 2010

    'Govt has role in property market'

    It steps in only to help ensure stability: Mah

    By Jessica Cheam


    NATIONAL Development Minister Mah Bow Tan yesterday emphasised that the Government has a role to play in the property market, but any intervention is 'done sparingly'.

    'We try not to intervene but when we do, we do it only because we want the market to work better,' he told The Straits Times in an interview. The Government wants to see a stable, healthy market, where prices are generally moving in tandem with the fundamentals of the economy, he added.

    He was responding to recent comments by the president of the Real Estate Developers' Association of Singapore, Mr Simon Cheong, who questioned the need for government intervention to halt the rise of private home prices.

    Mr Cheong also commented on Wednesday that the Government should shoulder some of the responsibility for short land supply and escalating property prices. (See: Redas chief had questioned need for govt intervention)

    The Ministry of National Development issued a statement on Thursday to rebut his claims, noting that the Government's role in ensuring a stable market 'matters to the well-being of Singaporeans and the economy'.

    Mr Mah said yesterday that Mr Cheong's argument that the Government should not interfere in the market, or that it may be intervening too much, was 'strange'.

    'It's not the intention for us to replace the market... it's like the HDB (resale) market, we don't set prices. We let the market set the prices, but we intervene to make sure the price is in line with fundamentals and there is no excessive demand from excessive speculation,' he said.

    The Government wants to ensure, for example, that demand is driven by people who want to live in the property, or invest for the long term, he added.

    'That's the position we take. We don't intervene unless we have to (and) only when we think the market is not working well.'

    Mr Mah also said that a property bubble is not good for the market and the public should be sceptical of developers who say otherwise.

    Mr Justin Chiu, executive director of Hong Kong's Cheung Kong (Holdings), said this week that contrary to what some believe, bubbles can be good as they fuel sales volumes and price rises.

    But Mr Mah said yesterday: 'When developers start talking and say bubbles are good for the market, I just wonder, why are they saying that?

    'It may be good for developers, but it's certainly not good for people who want to buy, because of affordability, nor for investors... because when the bubble bursts, everybody gets hurt.'

    The irony, he added, was that 'if developers talk up the market, and people believe them, and prices go up and spiral out of control, then the more we will be forced to act. So I hope people realise that'.

    Reacting to Mr Cheong's comment that the reserve price system is unable to respond quickly enough during periods of high volatility, Mr Mah said the system is not new and has worked well.

    'So many sites have been sold by that system, and we've sold sites where people have bid below the reserve price,' he said.

    But in the case of two tenders cited by Mr Cheong which were not awarded at the time, Mr Mah noted the bid prices 'were so ridiculous'.

    'It was a few bidders who were trying their luck because no one else was interested,' he said. Even if developers obtained land at a low price, he thought it unlikely that they would sell cheaper homes to buyers.

    When the market is high, developers will not sell for less than the market price, he added.

    'So it's a really strange argument. But we've made our reply, let's leave it at that.'

    [email protected]

Similar Threads

  1. Replies: 0
    -: 18-09-21, 18:14
  2. Replies: 1
    -: 25-08-18, 09:32
  3. Replies: 1
    -: 28-02-14, 07:53
  4. Cheong ahh sporeans FREE MRT
    By radha08 in forum Coffeeshop Talk
    Replies: 8
    -: 25-06-13, 00:54
  5. Free up commissions in housing market
    By mr funny in forum HDB, EC, commercial and industrial property discussion
    Replies: 1
    -: 09-05-07, 14:02

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •