Govt suspends sale of state land

Source : Business Times - 1 Nov 2008

Move welcomed in property circles as timely

GOVERNMENT Land Sales (GLS) from the Confirmed List of state sites have been suspended for the first half of next year.

The remaining sites on the Confirmed List will be transferred to the Reserve List. And a ban on converting office space in the central area to other uses, such as housing, will be lifted.

In a statement yesterday, the Ministry of National Development (MND) said Singapore’s fundamentals remain sound but the global downturn has affected the outlook for the island’s economy and property market.

Steps have been taken ‘to allow the market to better respond to the current dynamic economic conditions’, MND said. ‘The government will continue to monitor the demand and supply situation for the various property sectors closely and calibrate the GLS programme accordingly.’

The news was met with jubilation in property circles.

Simon Cheong, president of the Real Estate Developers Association of Singapore (Redas), said the move is ‘timely’ and shows the government is ’sensitive to the health of the market’.

‘I am sure that if the market weakens there could be other measures,’ he said. ‘It could extend this for another two to three years.’

The Confirmed List was last suspended between H2 2001 and H2 2005, according to the Urban Redevelopment Authority. A spokesman said: ‘The suspension of the Confirmed List is not indefinite. As the GLS Programme is reviewed every six months, the government will review the demand and supply situation in six months’ time and calibrate the programme according to the conditions then.’

Mr Cheong, who is also chairman and chief executive of SC Global, did not rule out the possibility of a return of deferred payments to support the property market. ‘You never know,’ he said. ‘If deferred payments were brought back, buyers will come back.’

The impact of the latest move may be limited, but it is important to ’stabilise’ sentiment, Mr Cheong said. ‘No one will go into the market if they think prices will go down.’

Frasers Centrepoint CEO Lim Ee Seng also thinks MND has fired only an opening salvo. ‘I am sure there will be more measures,’ he said.

Mr Lim also reckons MND’s action is not designed to ‘revive the market’. Instead, the suspension of the Confirmed List is expected to have a ‘psychological’ impact, as recent tenders resulted in bids below reserve prices.

Colliers International’s director for research and advisory Tay Huey Ying said that in the current weak market, sites on the Confirmed List would likely attract opportunistic bids or none at all. ‘Land is the country’s asset and the government has to make sure it is sold for a worthy sum,’ she said. The government has to regulate supply and demand and the GLS is a ‘tool’ to do this.

Concerns that there could be too many sites on the Confirmed List are not new. But until this year, the government’s position was that this was necessary to control rising business and living costs by making commercial and residential space affordable.

‘Initially, when the government continued with the Confirmed List, there was still some interest,’ Ms Tay said. But this has now mostly disappeared.

Recently, URA rejected the sole bid for a transitional office site in Mohamed Sultan Road because it was too low - at reportedly less than half of market expectations.

Of the seven sites on the Confirmed List, three have been launched for tender but the tenders have yet to close. Now, only the tender for an Executive Condominium (EC) site will proceed, as there are no new EC units available for sale.

The sites will still be available through the Reserve List. Under the Reserve List system, the government will only release a site for sale if an interested party submits an application and guarantees to pay a minimum price acceptable to the state.

Knight Frank’s director of research and consultancy Nicholas Mak has faith in the Reserve List system because ‘it is very market driven’. ‘You want a market equilibrium where there is no glut or supply squeeze,’ he said.

While he believes MND’s move will have little or no impact on supply, he noted that the government releases land based on assumed demand for property arising from economic growth.

The lifting of the ban on the conversion of offices in the central area to other uses could add more supply. But Cushman & Wakefield managing director Donald Han thinks this will simply give developers room to ‘breathe’. ‘It will allow them to adapt to certain market changes, like converting the offices to serviced apartments instead,’ he said. ‘We will not see hordes applying for a change of use.’

Savills Singapore’s director of marketing and business development Ku Swee Yong said: ‘The government recognises there is enough new supply and will now go back to the original intention of bringing life back to the city.’

It seems more help would be welcome. A spokesman for City Developments said: ‘We hope the government will continue to monitor the situation and introduce more pro-active measures to stabilise the property market.’