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MND moving to cool private property prices, say analysts

Friday . December 7, 2007

Cheow Xin Yi
cheowxinyi@mediacorp.com.sg

In what some see as its most aggressive move yet to rein in bullish private
residential property prices, the Government has acted to increase supply
particularly in the suburban, middle-class market.

In its closely-watched, half-yearly Government land sales (GLS) programme
for the first half of next year unveiled yesterday, the Ministry of National
Development (MND) pushed out 37 sites, of which 21 are residential.

The ministry said this supply should meet demand “over the medium term and
support the continued growth of our economy”.

While the total number of sites released is marginally fewer than the 41
under its previous land sales programme in June, Mr Nicholas Mak, director
of research and consultancy at Knight Frank, pointed out that more
residential and commercial units would be generated this year.

The potential yield is 8,250 residential units, up from 8,000 units
previously, while commercial sites could generate 410,000 sq m of gross
floor area, compared to about 354,000 sq m in the second half of this year.

“The good thing is, the commercial sites are predominantly on the reserve
list, which would only be triggered when there’s genuine demand,” said Mr
Mak.

There are eight residential sites on the “confirmed list” – for land parcels
that are tendered regardless of whether developers initiate interest. This
is similar to previous figures, indicating that the Government is still
quite aggressive in pushing out residential sites, he said.

In particular, Mr Colin Tan from Chesterton International thinks the move is
targeted at investors who have played up the suburban market to “ridiculous”
prices topping $1,000 per square foot, thus pricing out the genuine HDB
upgrader.

“The message is clear: Don’t play with the suburban market,” Mr Tan said.
“Now, investors will think twice before paying that kind of price, and it
should become more affordable.”

The release of confirmed sites in Yishun, Toa Payoh and Choa Chu Kang would
“help rejuvenate existing HDB towns while meeting the demand of HDB
upgraders for private housing”, said the MND.

Executive director of CBRE research Li Hiaw Ho noted that the placing of
four Executive Condominiums (ECs), three of them new sites, on the reserve
list was another reflection of the Government’s concern for the middle
class.

Sales of ECs are subject to income ceilings, which means developers would
have to keep their prices under control for a certain group of buyers.

While some industry watchers believe the supply initiatives are a move to
help ease the burden of the middle class – hard hit by inflation lately – it
could, on the flipside, lead to a supply glut, should the economy slow down.

“We’ll see the effects in 2009. If the economy slows down and demand
weakens, it’ll accelerate the happening of the glut,” said Mr Mak.

Mr Tan added that external economic concerns – such as the US sub-prime
mortgage worries and high oil prices – have already made the market more
cautious generally.

“If you look at indicators in the last quarter, prices are still rising, and
in that sense, you should be aggressive with the supply. On the other hand,
since then, lots of things have also happened and market sentiment has
changed,” he said.