Saturday, May 22, 2010

Govt bumps up land supply to cool market

Record 14,405 private homes can be built on land offered this year; move likely to immediately douse sales, and tame prices ahead

THE government yesterday dramatically increased the supply of land for the second half of this year to meet the demand for private homes. And the impact of this strong signal to the market is expected to be immediate, in terms of cooling home sales as well as dampening land bids. Prices are also expected to lose steam.

A record number of at least 14,405 private homes are expected to be built from land sold this year - comprising an estimated 6,270 units from sites sold in H1 and an 8,135-unit supply from confirmed list sites that will be launched in the second half.

This surpasses the previous record supply in 1997 when the government sold land for about 8,500 units.

'I hope that with this increased supply, homebuyers will be assured that there is ample supply in the market and therefore there is no need to rush. This will probably dampen some of the exuberance in the market,' National Development Minister Mah Bow Tan told reporters at a door-stop interview yesterday evening.

More demand side measures could be introduced if necessary, he added.

Under the Ministry of National Development's record land sales programme, the 8,135 private homes (including executive condos) from the confirmed list sites for H2 is some 2.8 times the supply of 2,925 units from the H1 confirmed list.

Through the reserve list, MND will offer land for 5,770 private homes in H2, lower than the 7,625 units in H1. Reserve list sites are launched for tender only upon successful application by developers, unlike confirmed list plots which are released according to a prestated schedule regardless of developer interest.

Nonetheless, the total supply of 13,905 units that can be generated from both confirmed and reserve lists in H2 is also the highest ever that the government has offered.

DTZ executive director (consulting) Ong Choon Fah said: 'The impact will be quite immediate because the message being sent is clear, that the government will ensure that there is sufficient supply to meet demand.

'Land bids are likely to moderate at the next tender, which closes next week. And we could also see impact on home sales this weekend. There could be some knee-jerk reaction, and people may start to evaluate and look at the latest sites on offer to see if they can afford to wait a little longer as they have more choices now. However, underlying demand for owner occupation remains strong as HDB upgraders aspire to upgrade to a condo.'

'As land prices start to moderate, developers will have more flexibility on their pricing strategy,' she added.

Frasers Centrepoint group CEO Lim Ee Seng told BT that while the 8,135-unit confirmed list supply was much higher than he had expected, it was not totally a surprise given the high land bids at state tenders.

'One of the reasons our company has not been bidding aggressively at state tenders is a fear that government will jack up supply, and our fear has materialised.'

Frasers Centrepoint has clinched just one site at state tenders in the past nine months - an EC site in Sengkang.

MND's H2 2010 land supply programme announcement yesterday evening was almost a fortnight earlier than last year's second half announcement date. Mr Lim welcomed the government's transparency with giving details as early as it could, as that will guide developers in bids at coming tenders.

For the second half of this year, the government is offering a total of 45 sites comprising 18 confirmed list and 27 reserve list plots. The land parcels consist of 27 residential plots, three commercial sites, another three commercial and residential land parcels, two white sites and 10 hotel sites.

In addition to 13,905 private homes (including 2,360 executive condo or EC units), the H2 2010 programme can yield 4.3 million sq ft gross floor area of commercial space and 3,750 hotel rooms.

Twenty-three of the 45 sites are new. The other 22 are being carried over from the H1 slate.

All five EC sites are on the confirmed list. Most of the residential land parcels in the H2 slate are in the Outside Central Region or in locations in the Rest of Central Region that are close to HDB estates. These sites will 'therefore provide additional supply of more affordable private housing', the Ministry of National Development noted.

MND has removed the white site at Ophir/Rochor roads that was on the reserve list 'as the development plan for the site is being reviewed'.

Cushman & Wakefield managing director Donald Han said that this may have to do with all the construction works going on around the site from the Downtown Line but noted that the government has compensated for this by introducing a plum 'white' site opposite International Plaza (above Tanjong Pagar MRT Station) to the confirmed list.

This will have minimum office and hotel components, although the plot is also envisaged to accommodate 490 residences.

MND also introduced two sites with minimum office components to the reserve list - a commercial plot next to Paya Lebar MRT Station and a white site beside Jurong East MRT Station - to propel the development of the two locations as major commercial hubs outside the CBD.

DTZ's Mrs Ong noted, however, that other than the white site at Tanjong Pagar, the Government has not offered any CBD office sites, perhaps suggesting it was adopting a cautious view of the office market.

CB Richard Ellis executive director Li Hiaw Ho suggested 'the Government should perhaps look into placing more commercial sites in the CBD on the confirmed list in the next six to 12 months to ensure a steady stream of office space for the business and and financial community from 2013 onwards'.

Source: Business Times, 22 May 2010

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