Developers fear oversupply; the govt must offer some sites but may not waste prime sites
THE six-monthly Government Land Sales (GLS) programme announcement is just around the corner, and property industry players are once again voicing the familiar calls for the government to reduce its quantum of land sales, and to halt sales through the confirmed list - except for strategic reasons - and to instead offer sites only through the reserve list.
The players wanted this even when the market was buoyant. Given the subdued conditions now, they may have a stronger case for moderating the GLS programme in the second half of 2008.
But numbers alone won’t do. The focus must also be on the quality of sites on offer. The 99-year leasehold private residential sites offered by the state in H1 2008 yielded a mixed bag of results. Some have attracted numerous bids at high prices while others did not. In one case, the bids were too low for the government to make an award.
In other words, certain sites are in demand, others are not.
What kind of sites does the market want now?
There is enough supply of high-end private residential sites, so the government need not bother about supplying land in the prime districts.
As for the mid and mass markets, the locations in demand are near MRT stations, and/or with water views, in close proximity to major shopping centres, good schools and other amenities.
A site’s location could decide whether it’s likely to be sold under current cautious market conditions. A tender that closed in March for a condo site facing West Coast Park and overlooking the sea drew a dozen bids. In contrast, there were only two bids for a landed housing plot at Jurong West and the Government decided against awarding it.
These days, developers will only be drawn to land parcels with strong selling points.
Clearly, more waterfront housing sites will be welcome - a point catered for in the draft Master Plan 2008 revealed last month.
And given the rising private transportation costs, homes near MRT stations will probably command an even bigger premium than they do today.
Unattractive sites may attract bids that are too low for the Ministry of National Development to make an award. This could affect the already-fragile sentiment in the residential market. So the MND should focus on choice plots in its H2 2008 list, the argument would go.
CBRE’s update of the MND’s H1 2008 programme shows that five private residential sites have been sold so far through the confirmed list. These are in various choice locations outside the city - near Khatib MRT Station fronting Lower Seletar Reservoir, at Lorong 2/3 in Toa Payoh near Braddell MRT Station, at West Coast Crescent overlooking the sea, in Choa Chu Kang, close to Lot 1 Shoppers’ Mall and the MRT station, and Phase 2 of Sembawang Greenvale near the sea.
Developers have yet to make a single successful application for reserve list private housing sites in the H1 2008 slate - with the sentiment being weak and the reserve plots generally not boasting choice locations.
While the government launches plots under the confirmed list for tender according to a prestated schedule regardless of market demand, it releases reserve list sites only if there is a successful application by a developer who undertakes to bid at a minimum price acceptable to the state.
So will the MND release the sort of sites the developers want? As a seasoned market player puts it: ‘They’re very practical people. When the market sentiment is weak, why give away their good sites at subdued prices?’
Instead, the MND may offer more run-of-the mill sites. Such plots may draw poor interest, and this could affect sentiment. However, developers may still like the end result: not much new land actually being sold by the state.
Put simply, the outcome developers desire - of having less state land being sold - may be effected if the government offers a slate of mostly not-so-desirable plots.
The current weak demand makes it clear there’s no housing shortage in Singapore.
A moderation of land supply sold by the government would lend some support to the market. Another benefit if the government ends up selling less land is that it will provide some relief to the overheated construction sector.
On the other hand, the government may not be able to accede to developers’ calls not to sell land in H2 2008 through the confirmed list - as official data have so far not shown any decline in private home prices, despite thin sales volumes.
The government also has to balance the need to provide stability to home prices with the aspirations of Singaporeans who have yet to buy private homes.
The MND will likely be prudent and moderate the GLS programme for H2 2008. A shorter list of sites in both confirmed and reserve lists, with stronger emphasis on less choice locations, could do the trick.
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