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Few surprises expected for H1 state land sales

Market conditions largely unchanged since last government land sales programme

By Kalpana Rashiwala

[email protected]

@KalpanaBT

Dec 4, 2015


PROPERTY consultants are generally not expecting any major surprises for the upcoming Government Land Sales (GLS) Programme for private housing and commercial land for the first half of 2016, and this applies to both the confirmed and reserve lists.

In the private housing segment, the authorities will have to weigh the current state of the market - including the ongoing ramp-up in private home completions and rising vacancies, as well as a more measured intake of overseas nationals - against the fact that developers continue to show a healthy appetite for land at state tenders as they need to replenish this vital raw material to keep their businesses going.

JLL's head of Singapore and South-east Asia research Chua Yang Liang said: "Still, the downward bias that we have seen in the confirmed list for private housing land supply since H2 2013 - following the introduction of the total debt servicing ratio - is likely to continue for the H1 2016 GLS Programme."

CBRE Research head for Singapore and South-east Asia, Desmond Sim, noted that since the previous GLS announcement in June for the H2 2015 Programme, market conditions have remained largely unchanged. "The property cooling measures are still in place. While the number of unsold private residential units in uncompleted projects has reduced, there is still an overhang of about 22,000 units in the market."

As for commercial sites, property consultants expect the Ministry of National Development (MND) to stick to the reserve list as its primary supply channel - given the surge in office completions from next year. Savills Singapore research head Alan Cheong, commented: "In the current context, what may be more relevant is that after taking into account the changing demand landscape such as tech companies moving to business parks and banks reducing their property footprint, historical Singapore office take-up rates may no longer be the norm and the annual demand baseline may have to be reset to a lower level. For Grade A CBD offices, this could be 750,000 sq ft per annum - down from the one million sq ft average annual take-up figure from 2005-2014."

For the current H2 2015 GLS slate, the MND has supplied land for 1,610 private residential (non-EC) units and 520 executive condos (ECs) through the confirmed list. It has also offered, through the reserve list, sites that can potentially yield up to 4,875 (non-EC) private residences and 820 ECs.

ECs are a public-private housing hybrid. Sites on the reserve list are launched for tender only upon successful application by a developer - unlike confirmed-list sites, which are launched according to schedule, regardless of demand.

While most consultants are expecting the combined housing supply from the two lists for H1 2016 to be in the region of H2 2015's 7,825 homes, they gave different takes on the composition of this number for the coming period.

CBRE's Mr Sim does not expect any EC sites in the confirmed list this time around, given the substantial supply. "EC sites can be left to the reserve list," he said.

According to R'ST Research, as at end-October, about 4,300 units remained unsold in EC projects already on the market. In addition, EC projects that have yet to be launched can yield a further 3,200 units.

Still, the firm's director Ong Kah Seng makes a case for a step-up in EC land supply in H1 2016. "Sales of ECs are expected to improve in 2016, following a cut in the average selling price by most developers from at least S$800 psf previously to S$750-780 psf in H2 this year.

"ECs will continue to be attractive to the sandwiched class, especially with the increased income ceiling for new EC buyers. There's no major oversupply of ECs."

Mr Ong reckons the MND will release one EC site on the confirmed list that could yield about 500 units. The Sumang Walk site in Punggol, which can generate some 820 units, is likely to remain on the reserve list, which may also be augmented by a new site for about 400 units to take the reserve-list EC supply to 1,220 EC units for H1 2016. He suggests that a site in Bukit Panjang estate would be ideal on either list as the area will see increased connectivity following the recent completion of Downtown Line 2.

In the non-EC private housing segment, JLL's Dr Chua suggests that given the recent triggering of a reserve-list site in Lorong Lew Lian near Serangoon MRT Station and Nex mall, the authorities could be motivated to release some land in the city fringe. However, he expects this to be through the reserve list, as is also likely to be the strategy for any sites that could potentially be offered in the Core Central Region.

The confirmed list will continue to predominantly feature suburban sites - as "given the fundamental population, demand will still be within the mass market", as Dr Chua put it.

Alice Tan, head of consultancy and research at Knight Frank Singapore, envisages the release of new private housing sites in the growth areas of Jurong Lake District and Bidadari to stimulate an increase in the residential population in these locales.

On the other hand, "areas such as Queenstown and Redhill which already see significant outstanding unsold supply are not likely to see injection of new supply", she added.

One factor that will limit the variety of new sites that could be rolled out in the upcoming GLS Programme is a paucity of sites given the steady reduction in residential state land sales in the past few rounds, some analysts said.

Mr Ong of R'ST foresees that further ahead, possibly in the H2 2016 GLS Programme, a retail site could be released at Bidadari or its vicinity - as the estate's development progresses.

For its H2 2015 GLS Programme, the MND released land for only 2,000 sq m gross floor area (GFA) of commercial space through the confirmed list; 275,580 sq m of commercial space could potentially be produced from sites on the reserve list - in places such as Central Boulevard, Beach Road and Woodlands Square (all with significant office components) and Holland Road. CBRE's Mr Sim said: "We would not be surprised if retail space is released in the upcoming GLS Programme to boost amenities around new transport nodes on the Downtown and Circle lines."

As for sites with a significant office component, most observers expect the MND to continue supplying them solely through the reserve list - amid fears of an impending office glut due to a confluence of major completions starting next year and weak demand.

Mr Cheong of Savills commented: "MND is likely to be fully aware of the spike in completions of office space in the CBD and regional locations from mid-2016 to 2018. Even going by historical rates of take-up, there would still be a supply overhang till the end of the decade."

Most analysts expect the authorities to stick to the current policy of not releasing any hotel rooms supply through the GLS Programme - as the existing stock and supply pipeline are deemed to be sufficient. Offering an alternative view, Savills' Mr Cheong said: "Nevertheless, it is still possible for the authorities to take a calculated risk and introduce a small hotel plot on the confirmed list and a mid-sized plot on the reserve list - in case fundamentals may be starting to improve for the Singapore hotel market."