CDL chief suggests review of land sales, rethink on deferred payment scheme
The uncertainty surrounding the local property market will last at least another six months and stakeholders must stay nimble to deal with the changing tides, says property tycoon Kwek Leng Beng.
Speaking to BT, he said that the standstill in the local property market would end only after the US sub- prime crisis clears. ‘I believe it will take another six months - if not more,’ the executive chairman of listed City Developments Ltd (CDL) added. But any restoration of confidence in the property market will also hinge on stakeholders - in both the private and public sectors - remaining nimble and reviewing their strategies and policies to meet changing market conditions swiftly, Mr Kwek stressed in a recent interview with BT.
‘You have to cut your coat according to your cloth. As a developer, if I said last year that I was planning to launch five projects this year, but you know this year the market is quiet, it would be unwise for me to say ‘because I decided last year to launch five projects this year, I must still go ahead’.’
He urged the government to likewise review its current land sales programme. The programme was fixed last year, when the market was buoyant, compared to conditions today.
Mr Kwek says the government may have been too quick to scrap the deferred payment scheme last October. He suggests the authorities should reconsider the scheme.
The Government Land Sales Programme is announced every six months. The current H1 2008 slate of sites was announced early last December, which means that some of the decisions were probably made even earlier, property consultants say.
‘It’s been proven in the past that the Singapore property market is a very important pillar that is closely linked to other markets - for example, financial markets, and the construction sector - and is in part driven by sentiment. So it’s vital for stakeholders in the private and public sectors in the property industry to remain nimble. They can do this by reviewing and modifying their practices quickly to stay relevant. By doing this, we can minimise potential problems and address them ahead of time,’ argues Mr Kwek, 68, who has about four decades of experience in the property business.
He also advocates a free-market approach to policy at Singapore’s current stage of development. ‘As Singapore competes in the race among global cities, Singapore must not be perceived as a city that interferes unduly in market forces. We should instead allow market forces to prevail in the property market - unless the situation gets out of hand,’ Mr Kwek says.
‘A global city does not necessarily mean your office rentals have to be cheap. Tokyo, London, New York all have high rents but continue to attract businesses. What’s important is that you have to create an environment where businesses can make money.’
He also says that the government may have been too quick to scrap the deferred payment scheme last October. Mr Kwek suggests the authorities should reconsider the scheme, which was started around 2002 to help stabilise the weak property buying sentiment at the time.
Under the scheme, private property buyers could buy units in uncompleted developments with just a 10 or 20 per cent downpayment, with the payment for the rest of the purchase price in some cases postponed until the completion of the project. In contrast, under the normal progress payment scheme, buyers have to pay regular instalments to the developer, based on the stage of the project’s construction.
‘If I am a developer and I want to offer deferred payment schemes to my home buyers, perhaps the developers’ bankers may be in a better position to assess the viability of the scheme even whilst staying prudent. The assessment will take into account the project, as well as the developers behind the scheme,’ Mr Kwek argues.
Many analysts had blamed deferred payment for fuelling property speculation. Mr Kwek, while acknowledging this, argues that the scheme also served a useful function: it enabled buyers of new residential properties to dispose of their existing properties at a gradual pace, instead of being forced to sell them.
The deferred payment scheme could be revived again - but this time with a higher initial payment of 30 per cent instead of 20 per cent, suggests Mr Kwek, who is also chairman and managing director of listed Hong Leong Finance.
He praises the government’s handling of the office crunch. The Urban Redevelopment Authority’s introduction of transitional office sites - allowing temporary low-rise office blocks to be built quickly on 15-year leasehold sites - was a swift response to increase office supply for businesses that don’t need to be in a posh CBD office block.
‘But a global city does not necessarily mean your office rentals have to be cheap. Tokyo, London, New York all have high rents but continue to attract businesses. What’s just as important is that you have to create an environment where businesses can make money.
‘Don’t forget, there are many cities fighting for investments. They can all copy Singapore. It’s very easy to duplicate. So to get ahead of the pack, we have to think of something different - something that nobody has done. This boils down to being nimble,’ Mr Kwek suggests.
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