Gov’t worried over rising land prices, potential oversupply of houses

Keshia Faculin26 Dec 2017

View of the land parcel at Fourth Avenue, an 18,532.2 sq m residential site that could yield about 455 houses.

The authorities fear that the buying frenzy for en bloc sites and state land would lead to a supply glut of houses and a correction of prices in the future. This would not only derail the residential market’s recovery, but also lead to losses for developers that paid record sums to acquire housing sites.

“The government is concerned about the manner and speed with which land prices are rising,” CBRE’s Research Head Desmond Sim told Reuters.

In fact, home builders paid an average premium of 22 percent for the top five residential sites sold this year versus similar land parcels in the past, revealed a November report by Cushman & Wakefield.

Previously, the Monetary Authority of Singapore (MAS) warned property players last month to exercise prudence when buying land.

This is because the redevelopment of the 20 en bloc sites sold as of mid-November, coupled with government land sales, could potentially add another 20,000 new private houses. This could more than double the number of unsold units currently in the pipeline within the next one to two years.

Given that the annual growth rate of Singapore’s population has slowed down from three percent between 2007 and 2012 to 1.1 percent in 2012 to 2017, there is considerable uncertainty whether the new supply can be fully absorbed by the market. This is amid an elevated vacancy level of 8.4 percent, with about 30,000 private homes left unoccupied as of the third quarter.


This article was edited by Keshia Faculin.

Rose Khoo
Dec 27, 2017
Exercise prudence!

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