Tuesday, 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

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.

Source: Business Times, 9 Mar 2010

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