Collective sales 'might not lead to higher home prices'

KEEPING A CLOSE WATCH: "The Government will continue to monitor the overall trends and developments closely, and take appropriate actions to maintain a stable and sustainable property market." - NATIONAL DEVELOPMENT MINISTER LAWRENCE WONG
KEEPING A CLOSE WATCH: "The Government will continue to monitor the overall trends and developments closely, and take appropriate actions to maintain a stable and sustainable property market." - NATIONAL DEVELOPMENT MINISTER LAWRENCE WONG

The spate of collective sales of residential properties will not necessarily translate into higher home prices, National Development Minister Lawrence Wong said yesterday.

This is because developers are subject to demand and supply forces in the market.

Mr Wong pointed particularly to the additional buyer's stamp duty (ABSD) imposed on a developer who fails to build and sell new units within five years of the site being awarded. The ABSD amounts to 15 per cent of the site's purchase price.

Such a measure would help ensure that developers price their home projects reasonably for sale, he said in remarks made for the first time on the collective sale fever.

At the same time, sites sold collectively will be developed and the new homes put up for sale in the next one to two years. This would increase supply in the market and put some "moderating pressure on prices down the road", he added.

Analysts like Mr Ku Swee Yong, co-founder of property consulting firm HugProperty, agreed with Mr Wong. Mr Ku also said the current weak demand faced by construction companies may push down the cost of redeveloping collective sale sites.

About 2,700 private homes have been sold en bloc so far this year, more than four times the 600 units sold last year.

Mr Wong, who was replying to Mr Lim Wee Kiak (Sembawang GRC), gave two reasons for the sharp rise in collective sales.

First, developers are keen to replenish their land banks. The minister noted a "healthy increase" in the sale of new units in the first nine months of this year which, in turn, means the "unsold supply in the pipeline has come down". There are now 17,200 unsold units, down from 40,000 in 2012, he added.

Second, the successful collective sales last year may have encouraged more owners of ageing residential properties to start the process of monetising their assets this year.

Mr Wong also said the Government will consider several factors before deciding whether to ramp up its land sales, and these include the supply of new units, population and income growth, as well as property market conditions.

Observers have said about 9,300 new units could be generated from the redeveloped collective sale sites sold since last year.

Coupled with an estimated 7,400 units coming from sites sold under the Government Land Sales (GLS) scheme, the bulk of the new supply of 16,700 units could be up for purchase in the next one to two years, and the sale completed by 2021 onwards.

The GLS programme is updated every six months: Sites on its confirmed list will be released for sale in the next six months, while those on its reserve list are available for purchase by any developer which assesses that there is enough demand. Details of the programme for the first half of next year will be announced by the end of this year.

Mr Wong assured the House that "the Government will continue to monitor the overall trends and developments closely, and take appropriate actions to maintain a stable and sustainable property market".

A version of this article appeared in the print edition of The Straits Times on November 07, 2017, with the headline 'Collective sales 'might not lead to higher home prices''. Print Edition | Subscribe