The Singapore government has slashed the number of sites it is offering for sale in anticipation of falling demand due to the poor global economy.
The Ministry of National Development (MND) has said no sites will be released under the confirmed list in the first half of 2009. And it has cut down the remaining sites for sale for the rest of 2008 from seven to just one. Five sites were moved to a reserve list, while one was taken off entirely.
The measures are expected to allow the market to better respond to the current dynamic economic conditions.
The last time the government cut back on land sales was exactly seven years ago - a month after the September 11 terror attack in the United States.
The global economy was then facing uncertainty and volatility similar to the current environment.
Analysts praised the government's latest response.
Managing director of Cushman & Wakefield, Donald Han, said: "I think this is a very good, swift, prudent government reaction to the issues involved in the marketplace over here. By not choking the market with confirmed list sites, you elevate yourself from low or opportunistic bids."
And developers agree.
Hong Leong Group said: "This is a timely move by the government. Given the unprecedented global financial crisis that we are in, the steep tumble in stock markets and serious slump in the property sector, any action that can alleviate the present situation will be welcomed."
The MND said Singapore's fundamentals remain sound, but global uncertainties have affected the country's economic outlook, as well as the property market.
Analysts noted that some of the sites that were moved to the reserve list carry billion dollar price tags. These are likely to require foreign investors with deep pockets.
Han said: "What the government is trying to do is to not force it out into the market when the market is not ready to put a bid for the site. Some sites the government is trying to launch are billion dollar ticket items, like the one in Rochor-Ophir and the site at Stamford Road location.
"A lot of the sites require participation of foreign investors. And if you look at global investment transactions, the total activity has dwindled by as much as 60 to 70 per cent just over the last three quarters.
"And the number of activity is likely to reduce further in the current quarter. If you're looking for participation by foreign investors, it's going to be a lull period."
Under the reserve list system, the government will only release a site for sale if an interested party submits an application with a minimum price that is acceptable to the government.
The situation is likely to improve towards the end of 2009, as construction costs come down.
Han said: "The construction sector had a good run in the last 12 months. Construction market tends to lag the real property market about six months to a year.
"We probably expect next year to be a good time to launch some of these sites. And we probably expect developers to come in and capitalise on lower construction costs next year and start bidding on sites. Activity will definitely pick up in 2009."
The government also said it will allow developers to convert office space in the central area to other uses. This was previously disallowed in response to an office space crunch.
Developers now have the option to build anything from serviced apartments to hotels, depending on demand.
Han said: "It's not a supply crunch issue but demand sustainability. Now it's best to let market forces decide." - CNA/yt
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