A prudent breather to ward off glut

IT IS a “prudent” move to let the market catch its breath and adjust, say analysts.

And in any case, the sites that will remain available for sale after the Government moved yesterday to further curb the supply of land for private homes and commercial space would probably get few takes.

The Ministry of National Development (MND) announced it will not release any private residential sites outside its land sales programme for the coming half year, while commercial space outside the programme would be confined to strategic projects.

In addition, no new sites will be added to the land sales programme for the first six months of the new year, said the MND, as the “global economic outlook is likely to remain weak” next year.

The latest measures follow the suspension of confirmed list sites for the first half, announced in October. Instead, sales will be carried out through the reserve list, where a site is released for tender only when a party applies to buy it at an acceptable price, as opposed to at a fixed date.

Overall, said Mr Nicholas Mak, Knight Frank’s head of consultancy and research,the land sales for the first half of next year “reflects the Government’s efforts to give the market the opportunity to adjust to a new supply and demand equilibrium, and to lessen the pressure of a market glut”.

Already, there is a marked lack of interest in government land. A transitional office site at Mohamed Sultan Road was not awarded in October as the Government deemed the sole bid “too low”. Two recent reserve sites released for application at Bukit Chermin and Jurong Lake are expected to draw little buying interest.

“Given the much diminished activity,” said CBRE Research executive director Li Hiaw Ho, “the Government would allow developers to decide on the pace of real estate development through the reserve list.”

The potential supply from the 38 sites on the reserve list for the first half works out to be about 7,920 private homes, 1.64 million sq ft of commercial space and 5,160 hotel rooms which Mr Mak noted was similar to the space that the Government had originally planned to sell in the current half of this year.

“But looking at the behaviour of developers in the last six months, I don’t think many of the sites in this new reserve list will be triggered, which means the level of activities (going forward) is going to be quite low,” he said.

For commercial space offered outside the land sales programme, the Government cut the amount for sale in the first half by 72 per cent from the current half.

Of the 430,000 sq ft for sale next year, about one third comes from commercial space at One-North, a 200-hectare Buona Vista project for research and development.

Another 53,800 sq ft will be released for interim use through vacant state buildings, while the rest are for retail facilities at Sentosa, as well as parks and MRT stations.

The Singapore Land Authority said the vacant state properties will go towards meeting “just-in-time demand for commercial uses, including growing demand for education-related purposes”.

These projects are meant to meet “strategic economic or development objectives”, and some already have pre-committed end-users, said MND.

As for the decision to go ahead with commercial space at One-North, DBS economist Irvin Seah said this “is in line with the longer-term objective of moving to a knowledge-based economy” to drive growth.

“The message is that, while we try to mitigate the current cyclical downturn, we cannot neglect and must continue to strengthen our competitive edge,” he added.

Source : Today – 5 Dec 2008

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