CLAIMS that the Government is partly to blame for Singapore’s short supply of land and high property prices have been firmly rebutted by the Ministry of National Development (MND) yesterday.
President of the Real Estate Developers’ Association of Singapore (Redas), Mr Simon Cheong, questioned on Wednesday the need for government intervention to halt the rise of private home prices, adding that it should shoulder some of the responsibility for short land supply and escalating property prices.
The ministry said yesterday in a statement that it ‘disagreed totally with his view’. MND pointed out that the Government’s objective was to maintain ‘a healthy property market’.
‘A property market bubble, if allowed to form, may not only impact housing affordability, but also severely impact the economy when it bursts,’ it said.
Mr Cheong – who is also chairman and chief executive of developer SC Global – had claimed that because the supply side was managed by the public sector, market forces were often not wholly free to respond to demand.
He noted that land values were largely determined by the Government’s reserve price system, but a site’s reserve price is not revealed.
This meant that during periods of high volatility, the system was unable to respond quickly enough to real-time market changes, Mr Cheong claimed, citing two recent government land tenders to illustrate the ‘conundrum and dilemma’ facing developers when bidding.
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) – some 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 in February – 2.7 times higher.
‘Had the two sites been awarded back then at ‘market prices’, the current demand-supply mismatch scenario in the residential market may have been smoothed and price increases for such mass market projects more muted overall,’ said Mr Cheong.
Refuting this, MND said it was arguable if awarding the two sites at the low bid prices in 2008 would have moderated property prices, or simply allowed the bidders to achieve a higher profit margin.
It pointed out that the reserve price system had not deterred the successful sale of sites under the Government Land Sales (GLS) programme.
The yield of the two sites in question, it said, was small – estimated at about 800 units combined – compared to a total supply pipeline of 60,476 uncompleted units of private housing at the end of last year, of which 34,234 units are still unsold. It was ‘questionable if the added supply from these sites in 2008 would have affected prices today in any way’, MND said.
It asserted that, as the custodian of state land, it was the Government’s duty to ensure a fair market price was obtained for a site. It had awarded sale sites in the past even though the top bid was below the reserve price, it added.
And, for the two sites, it was ‘not convinced that the bids represented fair market value, rather than opportunistic bids’, given there were very few bids and those received were exceptionally low.
Industry observers that The Straits Times spoke to yesterday seemed divided on the issue.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak agreed that the Government had a duty to ensure land was sold at a fair price.
‘Even if developers buy at a low price, there’s no guarantee they wouldn’t sit on it and sell when the market is hot at a high price,’ he said.
But Chesterton Suntec International’s research and consultancy director Colin Tan felt Mr Cheong had a point and that reserve prices could be more transparent.
‘You cannot reject a very low bid as not being market price simply because it was too low, because then you would have to reject a very high bid for the same reason – for it being too high,’ he said.
Redas declined further comment when contacted yesterday.
Source: Straits Times, 26 Mar 2010