Govt releases 15 sites with yield of 8,045 private residential units

SINGAPORE — Despite strong demand from developers in recent tenders and a pick-up in transaction volumes, the Government will keep the supply of development land for private housing steady for the first half of next year.

The Ministry of National Development (MND) announced on Wednesday (Dec 13) that the Government Land Sales (GLS) programme for the first six months of 2018 will comprise of 15 sites — six on the confirmed list and nine on the reserve list — which could yield about 8,045 private residential units. In comparison, 16 sites on which 8,125 units could be built were released in the second half of this year. 

Property analysts said the upcoming supply was lower than expected considering the keen level of interest in recent tenders, which have seen aggressive bids from developers. Nevertheless, they described it as a prudent move, in light of the risk of oversupply which has been flagged by the authorities. 

MND pointed out that there is a “large potential supply of around 20,000 units” from awarded en bloc sales and GLS sites that have not yet been granted planning approval, on top of about 18,000 unsold units that already have planning approval. “Moreover, there are more than 30,000 existing private housing units that remain vacant,” the ministry said. 

It added: “Taken together, the total supply in the pipeline, including the units from the first half 2018 GLS programme, will be adequate to meet the purchase demand for new private housing from home buyers over the next one to two years.”

The proposed residential, commercial and hotel sites for 1H2018 GLS programme. Table: MND

Last month, National Development Minister Lawrence Wong had noted that the number of private homes for sale will “more than double” over the next one to two years, taking into account the injection of supply from the redevelopment of projects that have been sold en-bloc. Subsequently, the Monetary Authority of Singapore — in its periodic financial stability review — warned that the large supply in the pipeline could lead to “a supply imbalance over the medium term if not matched by occupation demand”. 

Mr Nicholas Mak, executive director of ZACD Group said: “The government would want to prevent a housing glut in the leasing market in the near future. If such an unfortunate event were to happen, it could become a quagmire for the market”. 

Ms Alice Tan, head of consultancy and research at Knight Frank, noted that the expected interest rate hikes by the United States Federal Reserve “could impact on affordability and take-up of private homes”.

She added that Singapore’s population growth over the next few years was likely to be flat, amid fewer citizen births and a drop in number of foreign workers. As such, the upcoming supply can still meet the anticipated population growth, she said. 

ERA key executive officer Eugene Lim said the Government will avoid a “supply overhang” by keeping land supply steady, while allowing market forces to determine the supply.  Agreeing, Mr Wong Xian

Yang, head of research and consultancy at OrangeTee & Tie, noted that the bulk of the land under the upcoming GLS programme was on the reserve list.

Under the GLS, confirmed list sites are put up for sale regardless of market interest, while those on the reserve list are triggered for tender only if a developer commits to bid at a price acceptable to the land sale authorities.

Mr Wong said: “The recovery in the residential private property market is still nascent and cooling measures such as ABSD remain in place, so it may be still too early for intervention”

Nevertheless, Mr Ku Swee Yong, co-founder of online property information portal HugProperty, felt that there remains the risk of a supply glut. 

He noted that the estimated yield of units is based on an average size of about 900 sq ft per unit. “We can see from past cases that most times, developers try to keep the investment quantum small by shrinking the sizes of apartments to below 900 sq ft,” Mr Ku said. 

Among the land parcels offered under the GLS for the first half of next year, the Peck Seah Street site on the reserve list - which could yield about 700 units - caught the eye of the analysts. 

The plot land is within walking distance to Tanjong Pagar MRT station, and sits next to Tanjong Pagar Centre. The private residential units there might see “good rental demand” from expatriates working in the Central Business District, said Mr Mak. Mr Wong said the winning bid for the site could exceed S$1.1 billion, which would set a new record. In May, a 99-year leasehold site at Stirling Road attracted a top bid of S$1.003 billion — the first time that a bid for a purely residential site on the GLS programme has exceeded the billion-dollar mark. 

The three sites slated for executive condominiums (ECs) – at Canberra Link, Tampines Avenue 10 and Anchorvale Crescent – could also see strong demand, given that unsold EC inventories are running low, the analysts said.

“Demand for EC remains strong (but) EC sites are somewhat of a rarity in the GLS programme nowadays,” said Mr Wong, citing the last EC tender in Sengkang last year which drew 16 bids.