Lawrence Wong urges prudence from buyers and developers

/ EdgeProp
November 15, 2017 10:00 AM SGT
Of late, sentiment in the property market has improved. However, there is no denying that there will be a large influx of new private homes entering the market over the next two years.
“A large portion will come from the redevelopment of projects that have been sold en bloc,” says Lawrence Wong, minister for national development in his speech at the Real Estate Developers’ Association of Singapore’s (Redas) 58th Anniversary Dinner on Nov 14. “At the same time, we are also continuing with supply from government land sales (GLS).”
When the two are combined, the number of private residential units available for sale will more than double over the next one to two years. “The supply will be more than sufficient to cater to Singaporeans’ housing needs,” adds Wong.
The minister also pointed out that even as additional supply is coming on stream, the vacancy rate remains stubbornly high at 8.4% today. In fact, the vacancy rate has stayed above 8% for almost two years. The last time it was at this level was more than a decade ago, in 2005.
Vacant units equivalent to the whole of Bishan
In terms of actual physical units, this translates into more than 30,000 vacant private housing units still looking for an occupant. “To put this in perspective, this is more than the total number of dwelling units in the whole of Bishan today,” says Wong.
Wong: There is more than enough supply to meet occupational demand
The 25 successful collective sales in 2016 and 2017 could yield about 12,800 new residential units, according to Augustine Tan, president of Redas in his speech on Nov 14. Another nine residential developments with a potential yield of about 2,900 units have started the en bloc sale process. “All in, almost 27,000 units could be available for sale in 2018 and 2019,” says Tan.
Meanwhile, the supply from the 2017 GLS sites amounts to 11,225 units, which is 38% higher than the 8,135 units in 2016.
URA statistics showed a total supply of 35,022 uncompleted private residential units as at 3Q2017, of which 16,031 were unsold. This represents a 22% y-o-y drop compared with 20,577 uncompleted unsold units in 3Q2016.
In the first nine months of 2017, new private residential units sold totalled 8,702, a 54% increase y-o-y. Property analysts are projecting total sales volume for 2017 to ring in at between 10,000 to 12,000 units, compared with 15,000 units in 2013 and the all-time-high of 22,000 units in 2012.
Therefore, Minister Wong assures Singaporeans that “there is more than enough supply to meet occupational demand, and that they should do their homework carefully before making their home purchases”.
Developers to factor in ABSD, property measures
Wong also reminded developers to factor in the additional buyer’s stamp duty (ABSD) in their bidding decisions for both GLS and en bloc sites. “Developers will have to build and sell their units within five years from their land purchase or risk paying penalties,” he warns.
Owing to the higher land prices and the ABSD regime, developers’ profit margins may come under pressure and this could impact construction quality. While most developers are responsible and will not compromise on quality, “there has been feedback, from time to time, about developers who do not meet the quality standards”, says Wong.
Hence, he has asked the URA and the Building and Construction Authority to step up regulatory checks. Developers with a poor track record could have additional measures imposed, such as a requirement to obtain Quality Mark certification for their projects or being barred from selling units off-plan.
Redas’ Tan agrees. “With property measures [still] in place, slow growth in Singapore’s population and manpower curbs, it would be prudent to keep an eye on the continued structural challenges,” he says. According to the National Population and Talent Division, Singapore’s population grew just 0.1% over the past year, the lowest growth in over 10 years.
Tan cites growing regional competition, low business sentiments, security threats, demographic shifts, changing employment landscape and evolving citizen aspirations as some of the challenges faced by Singapore.