Govt must make tough decisions on land supply

The Ministry of National Development (MND) will find it hard deciding on land supply to be allocated for private housing projects in 1H2013, said property experts. It will have to balance several factors such as looming supply glut, record home sales, an economic slowdown and developers’ keen appetite for land.

“The quandary the authorities will face is that in the short run, demand chases supply. However, in the long run, the laws of supply and demand do influence prices, especially when the supply becomes physically completed,” said Alan Cheong, Research Head at Savills Singapore.

“Some have thus argued a bearish case from 2014 onwards, with 18,350 private homes expected to be completed in that year alone. That implicitly means supply should be curtailed early to prevent any price mishaps.”

But if the government were to restrict supply at a time when home prices are still trending up, it would cause another round of buying frenzy. The situation is not helped by the fact that land costs in Singapore have soared by double-digit percentage rates, Cheong explained.

Moving forward, he predicts that MND may stick to the current half’s quantum of residential land for the 1H2013 Government Land Sales (GLS) Programme for both confirmed and reserve lists.

For the first and second halves of this year, the GLS Programme allocated land for some 7,000 private homes under the confirmed and reserve lists.

“It could be status quo, in line with the 2H2012 Programme with supply of around 7,000 units each for the confirmed and reserve lists, or a step-up to 8,000 units in the confirmed list and 6,000 to 7,000 units on the reserve list,” said Ong Teck Hui, National Director (Research and Consultancy) at Jones Lang LaSalle.

Source : PropertyGuru – 29 Nov 2012

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