Govt Stops Outright Land Sales

Source : The Straits Times, Nov 1, 2008

Only exec condo site to proceed, while tenders for other sites cancelled

THE Government has largely put a halt to outright land sales until the middle of next year to help stave off the risk of oversupply as the property sector keeps heading south.

Most development sites it had previously slated for definite release this year will be shifted to a reserve list where properties are offered for sale only if adequate interest is registered by developers.

Property players hailed the move, saying it will alleviate the pressure of a supply glut and help inject some much-needed confidence into the market.

'The Government is recognising the market situation is more severe than forecast, given tight credit and high construction costs,' said Savills Singapore's director of marketing and business development, Mr Ku Swee Yong.

'It's fantastic news. It demonstrates the Government is on top of the property situation, sensitive to the health of the property market,' said Real Estate Developers Association of Singapore president Simon Cheong. 'More importantly, it shows that it is prepared to come up with other measures if the market deteriorates further as the health of the property market has major implications for the Singapore economy.'

Official data shows that property prices here have started to slip. While they have yet to plunge, sentiment has deteriorated dramatically in recent weeks.

As the global financial crisis deepens, property stocks have been battered and banks here have tightened credit to developers. Industry sources say banks have become more selective in who they deal with, with one saying lending for new projects is hard to secure.

In the office and residential markets, there are fears of an oversupply. The office market expects a large supply to come onstream from 2010. There is a long pipeline of residential launches. 'We all know about supply but demand is the unknown quantity,' said Chesterton Suntec International's Mr Colin Tan.

Knight Frank managing director Tan Tiong Cheng said: 'This is one small measure which will be a relief to developers who are worried about further supply coming to the market. It is also a signal that the Government is prepared to stabilise the market, and not allow it to go the way of equities.'

A Hong Leong Group spokesman said: 'Given the unprecedented global financial crisis we are in, the steep tumble in stock markets and serious slump in the property sector, any action that can alleviate the situation will be welcomed.'

Yesterday, the Government said that it will cancel the tenders for two out of three confirmed sites that were launched but not yet closed. It will allow the outright sale of an executive condominium.

Of four remaining confirmed sites for sale this year, three will be moved to the reserve list and one will be removed.

Developers like the reserve list system as it allows them to adjust supply to meet demand. It was the only sale method used for nearly four years after the slowdown in the wake of Sept 11, 2001.

Of the cancelled sites, one is for a transitional office site at Mountbatten Road while the second is for a white site - which can be used for different functions, such as residential or commercial - bordered by Rochor Road and Ophir Road.

Transitional office sites, aimed at easing the tight office supply, have lost their appeal as more supply will come in 2010.

The Government did not award a recent transitional site tender as the one bid received was 'too low' and has since moved it to the reserve list. The Government has also suspended the sale of confirmed sites in the first half next year and will sell only reserve list sites.

The Ministry of National Development also lifted a ban imposed 18 months ago on the conversion of office buildings into apartments in the city area.

The Urban Redevelopment Authority imposed the ban in May last year to ease an office space crunch. It was to have lasted till the end of next year.

While a rush of conversion projects is not expected, the move gets rid of an unneeded ban and will help to lift the confidence level in the market, experts say.

The ministry said the changes will allow the market time to assess and respond. 'While Singapore's fundamentals remain sound, the global economic uncertainties have affected Singapore's economic outlook, as well as the outlook for the property market,' it said.