Friday, June 20, 2008

Developers Get More Wriggle Room With H2 Land Sales

Source : The Business Times, June 20, 2008

Latest slate sees sharp cut in supply from confirmed list, while that from the reserve list is up

The government yesterday effectively delivered a sharp cut in state land sales that should give some relief to the current soft property market. Supply from the confirmed list of the Ministry of National Development's (MND) H2 2008 land sales programme is less than half that in H1.

Although the supply on the H2 reserve list has been increased so that the total on both lists is about the same as in H1, market watchers reckoned that it is a fair bet that not many reserve list sites will be triggered for release.

Not one reserve list site in H1 has so far drawn a successful application by a developer. In the face of weak home sales, developers held back from applying for reserve sites. Tight financing for property and a construction bottleneck could see them continue to hold back in H2.

'With most sites in the Government Land Sales Programme on the reserve list, the government will allow the market to activate supply in accordance with actual demand,' the Urban Redevelopment Authority (URA) said when queried about the latest programme.

Agreeing, CB Richard Ellis executive director Li Hiaw Ho said: 'Given the uncertainty in the wider market and the global economy, the government appears to be responding to feedback by allowing developers to decide the pace of development through the reserve list.'

In all, MND is offering 40 sites in H2. Eight are on the confirmed list, down from 11 in H1, and 32 are on the reserve list, up from 26.

The latest confirmed list will yield about 1,120 private homes, 50,000 square metres of gross floor area (GFA) of commercial space and 700 hotel rooms. This is less than half the H1 confirmed list supply of 3,000 private homes, 176,581 sq m of commercial GFA and 1,670 hotel rooms.

The overall H2 programme will generate 7,960 private homes, 400,000 sq m of commercial GFA and 5,750 hotel rooms.

This is similar to the H1 quantum - 8,250 private homes, 436,581 sq m of commercial GFA and 5,850 hotel rooms.

'The government is mindful of current market conditions,' said DTZ executive director Ong Choon Fah. 'They've announced a very measured programme, so as not to upset the market.'

However, one area of concern is MND's decision to release another two 15-year leasehold transitional office sites through the confirmed list - at Mohamed Sultan and Mountbatten roads. Market watchers are concerned that the completion of developments on further transitional sites will come closer and closer to the completion of major office projects such as Marina Bay Financial Centre, 50 Collyer Quay and Ocean Financial Centre.

URA, however, said that it has received market feedback that there is demand for transitional office sites from businesses that need office space urgently but not a city centre location.

The two plots are among 13 new sites MND is offering on its H2 slate of 40 plots. A plum new site comprises the existing Capitol Theatre, Capitol Building, Stamford House (all gazetted for conservation) and Capitol Centre, which may be torn down and redeveloped. A minimum quantum for hotel use will be stipulated. Another choice new site on the confirmed list is a hotel plot on Bukit Chermin Road next to Keppel Club. The three hectare site includes four black-and-white bungalows on hilly terrain. 'The sale of this site for hotel development is timed to coincide with the completion of the Labrador Nature and Coastal Walk nearby in 2011,' MND said.

It is also offering subdivided landed housing plots under the third phase of Sembawang Greenvale.

New plots on the reserve list include a white site next to Jurong East MRT Station, which will have a minimum office component and could also generate about 385 homes, and two hotel sites - one a beachfront plot along Kallang River and the other on Short Street in the Selegie area. Several new condo sites are also on the reserve list - including one next to Lorong Chuan MRT Station and another next to the Dakota Residences project, which will be previewed tomorrow.

MND also highlighted additional sources of space that the government will make available in H2 2008 - including about 143,000 sq m GFA of commercial space from sources such as interim use of vacant state buildings and small land parcels for commercial use; retail space at the mixed-used development at Lavender Street by JTC Corp; about 240 hotel rooms; and 20 private homes.

Giving an update on the supply pipeline, MND said that about 1.11 million sq m of GFA of office space, 435,000 sq m of business park space, 565,000 sq m of shop space and 11,161 hotel rooms are scheduled for completion between Q2 2008 and 2011.

In the private residential sector, some 56,500 new private homes are expected to be ready between Q2 2008 and 2011, of which 23,300 are in the Core Central Region.

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