Analysing Singapore Land Sales
Should our Government release more land for sale?
Dennis: We have invited a friend today to the talkshow. Her name is Ann. Let’s welcome her to the show.
Dennis & Manuel: Hello Ann.
Ann: Hi Manuel, hi Dennis. I’m so excited to be here to kaypoh on the first show and excited to see myself on video.
Dennis: We have shortlisted this topic for today’s discussion. Alright, the discussion is, “should the Government release more land sales as demand for property rises.” Okay, this is an article from EdgeProp, “Demand for residential property rises amid dwindling supply”. This is an extract from the article.
The Singapore residential property market is currently like a pot of steel on a fire that’s boiling over. That fire is fueled by economic growth, household income and low-interest rates. What the government is doing is putting more stones and bricks on top of the lead of the pot to try to keep it from falling over. But the fire is still going on. And the government cannot cool the fire because there’s GDP growth.
Singapore Land Sales- Should the government release more land
Dennis: I think it’s quite a long read. Summarising it, it is saying that the Government has a tough job to do between should they release more land? If they release more land, they might risk making the construction labour crunch tighter and that may be a problem.
Manuel: Well, first of all, we have to understand why the demand has been increasing for the past few months actually.
Despite the ongoing pandemic, this all comes down to the fact that new projects take a long time to construct, especially the BTOs. BTOs get delayed, people go towards the resale market. HDB resale market. And then people who benefit after cashing out from the resale HDB market, they go on to mass market condos. And those mass market condos or sellers who have sold the property then go on to bigger properties. According to new launchers. All this is adding actually pressure to the dwindling number of unsold units in the inventory list across the country.
Manuel: So for developers who are hungry for land, they really only have two choices right? it is only either through en-bloc or through the Government sales programme. But the government also has this very tricky dilemma. Because if they were to release a lot of land, then there’ll be a lot of competition for labour, and for construction materials. And as you can see from the headlines, the articles that we are showing over here, right, you can see that actually, there’s intense competition these days for labour, especially, because we are now having a manpower crunch due to the restrictions placed on South Asian workers.
Dennis: For the part, right? Although Government tried to recruit more China workers, but the fact is that even in China itself, they are growing very fast. I’ll say our salary prices in Singapore is not attractive enough to bring them over.
Ann: In fact, today’s Straits Times, they actually publish that there’s more and more Singaporean household who currently lives in HDB, they are actually shifting, you know, to the condominium. So there are more demands. So naturally, you know, the supply has to be more, otherwise the supply cannot meet the demand.
Dennis: That’s that’s the dilemma. If you look at this article, “Raising land suppply may aggravate housing issues” by Business Times on 3rd June. The key issue is that… Yeah, the prices are rising. So a lot of developers are hungry for land. So if the government agreed to them, or said, “Yeah, let’s release more land.” Then the problem will be, alright, it solved the supply issue. But then releasing more land might cost materials to go up. And labour as Manuel mentioned, labour has shortage and the China workers are not coming over. So that means the construction cost might rise. And it will then lead to a spiral in the price for future. So it’s really between a hard place and a rock. If the government tried to cool down by controlling the supply of land, or even coming up with more ABSD, it might be like putting stones on the pot. Yes. There’s an underlying economic growth and the interest rate is really very low. And this pandemic, everyone wanted to have a bigger space or more personal space.
Ann: like working from home
Dennis: So in my personal opinion, is more like there’s a genuine fundamental reason why the demand is there. It’s not like speculation.
Manuel: I mean, it’s in best interest for everybody, that this demand is real. You know, it’s not based on speculation. It’s not like a bubble is forming you know, because the last time a bubble formed. It wasn’t really very good for everyone across the world. Also, keeping in line with the economic fundamentals as well. The government will always want to ensure that the property prices don’t rise beyond logic. You know, so everything has to be very conservative. And if you look at the government policies, right, they’re pretty much leave it to the market forces. They don’t really have a heavy handed approach, you know. So what they do is they just release the government land sales. You guys bid for it and then we’ll see how it goes from there.
Dennis: So let me bring you back to some of the time sequences because why this article captured my attention was that there’s a sequence of flow. Okay. So what happened was on the third of June, land supply issue came up. So on the fourth of June, this interview for all the top leaders came on the fourth of June, which is an article for demand for residential properties rising meet during supply. That’s all third and fourth of June.
Next look at the slide three. So on June 7. Business Times mentioned that developers and contractors are battling labour crunch, as we mentioned, so it kind of reinforce what’s happening. And for my experience, I have friends with the industry, or renovation. They mentioned that finding our workers is very tough. So right now the current workers still in Singapore right now, the foreign workers, they are actually asking for higher pay.
On the 11th June, then the government came out with this land sales programme. So I think everything is planned out. From third, to fourth to seven and eleventh of June. Everything is happening in sequence. So this shows it is an important issue and the government’s working on it.
Ann: They need to come up with more land sales or maybe cooling measures, you know, something will happen.
Manuel: It is even scarier right, if it’s another cooling measure.
Daniel: Honestly, you asked me. assuming so let’s do a roleplay if I’m in the government, to be honest, I also have a hard time to decide Should I release more or not. So knowing our government, they are quite prudent so I think they took a calibrated approach.
Manuel: That’s why Dennis if you look at this article, right, you can see that even though the confirm number of units in the second half of this year’s government land sales programme has increased by a lot it’s not by a lot it’s a little bit only I believe about 400 over units.
Ann: From 1600 to 2000.
Manuel: The government response is actually very tapered very conservative actually. Yeah because for sure they will have to release more land because if they don’t right the developers who are very land bank hungry they will turn towards en-bloc.
Daniel: That’s why when Manuel mentioned about en-bloc right, it brings me to a point.
Daniel: Remember in the 2017 or 2018 at that period of time, that was the period when there was an en-bloc craze. There was a fever. The government was forced to come up with the additional cooling measures in June 2018 itself. When there’s a there’s a scarcity of land, Government don’t want to release the land. But being the developers right, they need land to survive. Just imagine if today I am Far East or Capitaland. I’m all the big boy developers, CDL if you don’t give me land to build, I can’t win any land plot from the GLS programme. What can I do? Do I have to disband like my staff and ask them to take a break? Not possible, right? So I just need to have a land. So you don’t give me land, I will go to En-bloc. No choice, during that period of time, 2017 and 2018 they say maybe to cool down the market I release less land but they went for enbloc.
Ann: I also noticed that most of the land size are not so big. The use of the land size. And if they release right, it’s actually I feel that the bidders will also you know if the developers are hungry for land. So naturally they will bid higher. Look at the recent one, the Tengah Garden Walk. Okay, I think the price is so expensive for EC. It is 603, the highest bid 603, if you compare to Pasir Ris Eight. Pasir Ris Eight is only at how much? 680?
Dennis: Pasir RIs Eight is an integrated development.
Ann: Imagine you are comparing with an EC at Tengah. It is a non mature estate. And it’s an EC at $603psf (land price).
Dennis: And Tengah is still not even an existing estate yet.
Ann: I cannot believe it. You know, when I look at the figures, Oh my god. So how much are they going to launch? Straits times reported that Tengah EC is expected to be launched at $1,200 to $1,300psf
Dennis: So is the fact that if land prices will increase construction cost will increase. So there’s no way the property price can be rewind back to the old price itself. Even for this time, right, for this article, on the 11th of June, the government increased the GLS units from 1600 to 2000 units. At 2000 units, it is actually very conservative.
Why do I say that? Because this article also mentioned that As compared to the 2010 and 2012 period, right, there’s two periods where the government release 7,000 to 8,000 units itself. So can you imagine 7,000 to 2,000, there’s a big difference. So from this article right, it shows that, hey, this is a plot of land in groups, EC, private condo, white sites. And most of these are on the reserve list. When you sell the land, there’s two lists, one is called the confirm list. You guys give me the best price and I will let go of the land itself. For the reserve list. They do not put up for auction or for bidding, if anyone is interested, send me a bid and you must adhere to the minimum bid, then they will say, okay, you give me a deposit, then you take out the land. So it’s very prudent based on demand supply itself. So this is really a calibrated approach,
Manuel: I believe for all of us. If you told us seven years ago that brand new EC will hit $1,000 psf, we wouldn’t believe but look at the reality now, especially for these EC at the Piermont site. You know what I mean.
Ann: The currency already over a $1,000 psf.
Manuel: So all these all these land prices are even if the government response is very tapered, and measured, it only shows that land prices are increasing, right, increasing everywhere, not just EC. But even the private residential probably in the dairy farm site, probably in the tembusu side as well, you know, and especially this site that Dennis has mentioned.
Daniel: So actually for me and Manuel, we did a video “SG prices broke new high-What is happening?“. Prices for landed, condo, HDB and even rental rose. So everything is rising
Ann: inflation, inflation inflation.
Dennis: It is a bit scary,
Manuel: It is so scary that for consumers who are looking at our videos, and maybe reading the news, right? They might be thinking. Everything is increasing so quickly, when is the best time to buy? Now, it doesn’t exist, actually. Now, if you can afford it. If it’s within your means, now is always the best time.
Dennis: Okay, you should put it this way. be it stock market or property, there’s no way you can time so well that I always sell at the peak. There’s also no way you can time yourself that I’ll always buy at the lowest. No way. So along and in between no one is guru.
Ann: If you want the time, you will miss.
Daniel: Of course you do your homework, plan your finance, and somehow you must press a button. So for my experience on that, if you do not press a button, within a year, then you might not be pressing the button after all. Press the button is quite scary, you press a button This one is press a button is buying a property, a lot of pressure coming. Your mortgage, your stamp duty, I cannot lose my job, I have to work harder now that I got to be this baby that is a property.
Ann: That’s why we have to buy prudently. You need to do you know the proper financial planning.
Daniel: Back to this article on the 11th of June this article white site at Marina View triggered from the reserve list. So this is a white site. That means the demand is there.
Ann: It’s actually very interesting. And I always love white site no matter what. Because there’s no restriction to me. It’s like it’s so flexible, I can build residential, I can build commercial. And I can have grade A offices there. I can even have hotels, serviced apartment or retail shops. So it’s like you know, everything under one roof when the development is built, selling price will also be very much higher compared to you know, just a typical residential or just a mixed development.
Dennis; Now that you mentioned this white site and Marina View has been triggered for 1.508 billion. A big sum of money. I think this whole site right is actually to me it’s quite exciting because this is going to be a part of the Marina Bay growth, which should be the next CBD. So after this article was released, this June 16, Article. URA launches two one-north GLS sites for sale. Very recently. See the sequence?
Ann: My investors, they bought two bedrooms and three bedrooms, because, for one, we only have 165 units. So I said, I still have three, three of them that didn’t manage to get any units that they want. Yeah, because it’s totally free.
So what what would you be the rental went up was like, rental for a two bedroom.
two bedroom, we could easily fetch close to 3.8. To 4k. For today. Yes. Yeah, yeah. Yes. Yeah, for Chester residences. They’re actually bigger in terms of units. I mean, unit size, they are bigger. So they can rent up to 4.8 to 5k. Still is also? Very, very big. Yeah, very bit unit. So why? Actually, I have quite a number of investors. They couldn’t get a unit at one off Eden. So they actually told me that. Let’s wait, because I told them, it looks like this and other two products, you know, just opposite one. So from inside, they were like waiting. Okay, well, where will it be? Please let us know. So right now, this news. open for you just to close, because everyone is waiting over right for this, the topic that we’re discussing. Today, you’re seeing that actually the government has responded to what’s happening. So they are watching the attorney be prudent. They don’t want the price to run away since I put most of the sights on the service and the demand came in. So it’s really a very genuine demand from the developer itself. Yeah. So I think is is a fair approach so far. Man, you and anyone else?
Well, I think that that what we have mentioned early on, if you are planning to take action, now would be the best time. But exercise prudence, always do your due diligence was the last last last last network. Because I have been serving buyers for I’m looking for one to two bedrooms. And I realised, interestingly enough, what the supply for one or two bedrooms, all across the country for new launches, is on the low side. Actually, not much not the two bedrooms left, everywhere else. So while you can go for it, we are on the ground agent. So for us not every day, you know, it really plays a part for us to understand, you know how this thing works? And how does it actually integrates into our daily lives? And the impact for investors as well.
I think to be fair, all these views and opinions, our own comments, we might not be right. It’s up to you to make the final conclusion. Is it right or wrong? Whether to take next step or not? Is it tomorrow or this next year? It’s up to you, but it’s really quite fun. If you need any help from us to answer questions, please leave a comments or give us a call from somebody so so with that we end this show today. So thanks, guys. See you guys next video, right here.
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