The supply of state land will see the uptrend.
The downtrend in the supply of state land in the confirmed list for private housing (excluding executive condos) development may be reversed in the second-half of this year. Some property consultants predict a moderate rise in supply, citing developers' strong appetite for land replenishment and a recent pick-up in private home sales.
The timing of any potential tweaking of cooling measures would also come into play in crafting the state's land sales strategy. The cards are in the hands of the government. They will have an idea of when they will ease the measures; so they would adjust the GLS (Government Land Sales) supply quantum in tandem, says an industry observer.
The Ministry of National Development (MND) is expected to continue channelling commercial land supply predominantly through the reserve list in the H2 2016 GLS Programme, given the glut as well as structural changes affecting demand for office and retail space. Sites on the reserve list are launched for tender upon successful application by a developer, unlike confirmed-list sites, which are launched according to schedule regardless of demand.
Property consultants generally forecast a continuation of the freeze in supply of hotel sites, although at least one analyst warns that a potential shortage of hotel rooms could build up a few years down the road if this policy continues much longer.
In its first-half 2016 GLS Programme, MND has supplied land for 925 private residential (non-executive condo) units through the confirmed list. Despite soft prices and weakening rents, some think the authorities could raise slightly this quantum for the H2 2016 slate - to cater to developers' hunger for restocking land as seen at state tenders.
Another factor that could support a moderate hike in confirmed-list supply is the pick-up in private home sales since March. That said, MND is unlikely to step up the confirmed list in a significant manner - until it is more certain of a market recovery, going by what it has done in the past.
Indeed, most property consultants expect MND to pretty much maintain the pace of (non-EC) private residential land supply on both confirmed and reserve lists in the coming programme. On the reserve list, MND is supplying land for 5,035 (non-EC) private homes in H1 2016. Maintaining the quantum of non-EC residential land supply on both confirmed and reserve lists is sufficient to sustain developers' hunger for land, to provide a level playing field for developers to build up their land banks and for the market to absorb unsold stock.
The number of unsold private homes in uncompleted projects with planning approvals has eased to 22,370 units as at end-Q1 2016, from 27,061 units a year earlier and the high of 42,045 units at end-Q1 2009 during the global crisis. It is noteworthy that there were no residential sites on the confirmed list in H1 and H2 2009.
However, most analysts remain concerned about the high volume of unsold ECs (a public-private hybrid housing form), which stood at 6,520 units as at end-Q1 2016. A moderation of EC land supply in the confirmed list could be expected.
Some market watchers even recommend that no EC land be supplied on the confirmed list over the next six months; EC sites should be offered only through the reserve list. This might help to stem the growing pressure from the increasing stock of unsold EC units.
Giving a contrarian view, however, another analyst made a case for an increase in supply of EC land on both lists. He pointed to an improvement in the volume of EC sales by developers in H2 last year after they trimmed average prices to around S$750-780 per square foot - from S$800 psf or more during 2014 and H1 2015.
The full impact on demand from last August's increase in the income ceiling for those buying new ECs has yet to flow through, according to him. As long as new EC projects are priced 20-25 per cent below new 99-year private condos in equivalent locations, there is a value proposition for ECs. There were suggestions that the authorities could push out new EC sites in relatively unsaturated locations such as Jurong West (given its proximity to the Jurong Innovation District) and Bukit Panjang (to leverage on the opening of the Downtown Line 2 MRT stations last December) and possibly, the up-and-coming Bidadari area.
Bukit Panjang and Bidadari could possibly cater for new private condo sites. BidadariÂ would also be a good location for a mixed-use (commercial/private residential) site. In H1 2016, MND has supplied land for 11,000 square metres gross floor area (GFA) of commercial space through the confirmed list; it is offering reserve-list sites that can potentially yield 261,580 sq m GFA which developers may take advantage of, if they envisage demand.
With the office and retail property markets reeling from an oversupply, most players expect MND to stick to the current formula of minimising confirmed-list supply in H2. Any supply of commercial space on the confirmed list could be via mixed-development sites rather than pure office or pure retail sites - as is the case currently.
Analysts generally expect the authorities to keep the white site along Central Boulevard in the CBD (primarily for office use) on the reserve list. However, some see the commercial and residential site near Holland Village MRT Station, currently on the reserve list, being moved to the confirmed list to spur the development of the Holland Village Extension.
Owing to a host of factors ranging from structural changes impacting industries to disruptive technologies bypassing the traditional purveyors of goods and services, the traditional demand growth engines for office and retail space are losing steam.
Office demand has been hit by downsizing in the financial, commodity and marine sectors, while tech companies are being lured to business parks. Brick-and-mortar retailers are affected by online shopping and a leakage of shopper dollars to overseas due to budget airlines. The traditional adage that if we build, they (tenants) will come, may need rethinking or it may risk stalling the market. Therefore this time round, the government is likely to handle the supply-side policy with even greater finesse and err on the side of caution.
MND has not offered any hotel sites since the start of 2014. A consultant believes the authorities may resume the sale of hotel sites in H2 2016 or, more likely, in H1 2017. She notes that the bulk of new hotel room completions on the island will take place from 2016 to 2017 - and this will take about two years to be absorbed.
From acquiring a site to opening the hotel will take some two to two-and-a-half years. Therefore by the time the sales programme is resumed in H2 2016 / H1 2017, the new rooms supply will come on-stream only from 2019/2020 onwards. You don't want a situation where if the global economy recovers and tourism improves, there is a shortage of hotel rooms in Singapore and rates shoot through the roof.
Adapted from: The Business Times, 6 June 2016