What's New In Property

A cautious approach on land supply

Despite clear signs that there is strong demand for land, the Government Land Sales (GLS) programme for the first half of this year remains largely similar to that for the second half of last year.

There is no significant change either to the number of development sites or to the potential number of housing units that these sites could yield from the Confirmed and Reserve lists.

In fact, the total number of residential units, including executive condominiums, in the first half of 2018 is slightly lower - about 2 per cent - than the 2,840 units in the second half of 2017.

The rationale behind the latest GLS programme is not surprising.

Last year, some 29 residential collective sales - including commercial developments with residential units - worth $8.7 billion were sealed, the highest in a decade and a huge jump from just three such deals worth $1 billion in 2016.

This collective sale wave is expected to yield at least 11,000 new homes, about half of which could be launched for sale this year.

The bullish sentiment is largely a reflection of the dwindling pipeline supply of unsold private homes, which stood at 18,891 as at end-2017, down 0.9 per cent from 19,071 units a year earlier. At the peak, there were 39,184 unsold units as at the end of the fourth quarter of 2011.

Against this backdrop, the Government is adhering to its cautious approach on the supply front to avoid further exacerbating the imbalance that already exists between future supply and genuine end-occupier demand.

In fact, the regulator has flagged the risks of rising vacancies amid slower population growth.

National Development Minister Lawrence Wong said in Parliament last November that eventually all the collective sale units will be redeveloped and put back into the market, putting some moderate pressure on prices down the road.

He also added that home prices may not necessarily increase, as developers are still subject to demand and supply forces in the market.

Three weeks later, the Monetary Authority of Singapore, in its 2017 Financial Stability Review, acknowledged that there is "excessive exuberance" in the property market as well as risks from rising land prices and a possible oversupply of housing stock.

Nevertheless, with little change in the latest GLS programme, we expect the aggressive bidding behaviour by developers in both the public and private tenders to continue this year.

UNDERLYING HOUSING DEMAND REMAINS ROBUST

The property market experienced robust sales last year, with developers selling a total of 10,566 units, 33 per cent more than the 7,972 units in 2016. We believe last year's sales tally could potentially be higher, if not for several developers holding back launches in anticipation of an expected upturn in prices this year.

New home sales volume is likely to spike this year, as the launch pipeline expands due to expected launches from the collective sale market, GLS sites and relaunches from existing projects. We expect around 13,000 to 14,000 units sold by developers this year if the new launches are priced reasonably.

Developers are encouraged by the sales momentum and have shown strong appetite for development sites. Last year, land transactions in Singapore reached $16.6 billion - a 10-year high - in both the public and private land acquisitions.

As the property market turned around earlier than expected with the overall property price index rising 1 per cent last year, developers will continue to source for choice sites to ride the wave of growth for the rest of the decade.

• The writer is the director and head of Singapore research at property consultancy Cushman & Wakefield.

A version of this article appeared in the print edition of The Sunday Times on February 11, 2018, with the headline 'A cautious approach on land supply'. Print Edition | Subscribe