Increasing land supply ineffective in controlling property prices: analysts
By Lynda Hong | Posted: 20 April 2012 2235 hrs
SINGAPORE: Increasing the supply of land as part of the government land sales programme may no longer be effective to control property prices.
This according to analysts who say that developers are becoming more creative in developing hot selling projects.
It also means that property prices may continue to remain high due to strong demand for such projects.
The government's latest release of six sites for residential development are expected to generate strong interest from developers.
Last year, a record number of 35 land parcels for private residences were put out for sale by the government.
But increasing the supply of land may not cap property prices.
Nicholas Mak, executive director, Research, SLP International, said: "Developers through their innovative design and so on, are increasing the elasticity of demand. In other words, whatever the government can push out, developers are able to absorb that supply and turn them into new products which the market is buying up.
"So the policy of trying to stabilise prices or reducing prices by pushing out more land parcels is actually not working out as initially planned."
Record sales of residential properties in recent months have also boosted developers' confidence.
Analysts said developers are now willing to bid higher for choice sites.
Analysts believe the site at Buangkok Drive will attract seven to 12 bidders. Its locality being just a walk away from Buangkok MRT station should draw bids of between S$190 and S$240 million.
While the six sites are estimated to yield 2,380 units, this number could turn out higher.
This is because the developer could shrink the size of a unit to make space for more units in a development in order to offset the pricier piece of land.
Demand is forecast to remain high, thanks to low borrowing costs and aspirations of HDB upgraders.
Lee Sze Teck, senior research manager, DWG, said: "Generally developers are still positive about the property market because they feel that people still want to upgrade, (and) move into a private condominium residential unit."
Experts also noted that policy risks like the recent cooling measures could also push both developers and buyers to quickly make hay while the sun shines - before another round of cooling measures dampen the market.
- CNA/cc