Why revealing reserve price not a good idea

Some have called for the Reserve Price of State lands to be disclosed – and yesterday, Minister for National Development Mah Bow Tan explained why the Government did not think it would make the system work any better.

“If we were to reveal the Reserve Price for sale sites, then it may influence or distort the developers’ independent assessment of land prices and their bids, or deter some developers from bidding,” Mr Mah said in a written response to a question tabled by MP (West Coast GRC) Ho Geok Choo.

The Government uses the Reserve Price as a guide – not a minimum price – in deciding whether a site from the Reserve List will be triggered for sale or awarded.

“There have been instances in the past when we have both allowed the successful trigger of sites as well as the award of sites at bids below the Reserve Price,” Mr Mah pointed out.

He reiterated that the system was working well – 13 sites have been triggered in the first half of this year, the most since the system was introduced in late 2001.

“By not announcing the Reserve Price, we let developers decide the price they are prepared to pay … and their bids thus provide us with a sense of the fair market value for the site.”

In line with this principle, the Government announced in March it would consider launching a Reserve List site for sale if more than one party submits a minimum bid price close to the Reserve Price for the site.

Source : Today – 19 May 2010

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