Friday, September 4, 2009

Government's re-introduction of confirmed list 'not surprising'

NATIONAL Development Minister Mah Bow Tan's statement on Wednesday that there is a 'definite possibility' that the Government will re-introduce land sales through the confirmed list system from the first-half of next year came as no surprise to property analysts, who are already speculating about the type of sites that are likely to be released.

But developers, who were also expecting the move, are not as blase. Some property companies that BT spoke to are worried that the supply of state land will be increased just as the market is starting to improve.

'This news is not surprising,' DBS Group Research said in a note yesterday. 'The government traditionally utilises the land sale mechanism as a supply-side measure within the physical market.'

According to DMG & Partners Securities analyst Brandon Lee: 'Mr Mah's statement is in line with what we predicted - that the government will resort to supply-oriented measures, instead of demand-oriented, to calm the strong appetite for mass-market projects.'

Developers are concerned about an increase in supply, after home sales began to pick up in February this year following a flat 2008.

'No one knows if the recovery is for real or if the momentum can be sustained,' said one developer. 'Increasing the supply now could cause the market to go down again.'

But developers concede that it is good that the government has not announced any demand-oriented anti-speculative measures.

Looking at recent sites triggered from the reserve list, analysts believe that residential and hotel sites are most likely to be placed on the confirmed list. Office sites, on the other hand, will be confined to the reserve list so the government can gauge interest in the market, they feel.

Many market observers are saying that the trigger for bringing back the confirmed list could have been the recent government tender for a 99-year condo site in Chestnut Avenue, which drew 13 bids and a much higher-than-expected top bid of $280 psf per plot ratio from two companies in the Hong Leong Group. The top bid was 2.3 times the minimum bid price.

For now, both the government and market watchers are expected to keep an eye on the results of two tenders that close soon - one in Dakota Crescent next Tuesday and a commercial and residential plot at the corner of Yio Chu Kang and Seletar roads on Sept 17 - as well as a Serangoon Avenue 3 tender yet to be launched.

'We believe the final confirmed quantity will depend largely on the level of competition of bids for three government sites, as well as macro-economic indicators and take-up of mass and mid-market projects during the next four months,' said Mr Lee.

Source: Business Times, 4 Sep 2009

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