Govt pares land supply for private homes amid demand and supply concerns

THE government has tempered private housing supply from its land sales programme for the second half of the year, amid continued signs of muted demand and a glut in supply. The total land supply from sites on both the confirmed and reserve lists for H2 2019 can yield about 6,430 private residential units, just a shade under H1 2019's 6,475 units.

This makes the upcoming half-year's supply the lowest since the first half of 2007, when the figure was 5,475 units. On an annual basis, this year's total supply of 12,905 units is the lowest since 2006's 8,990 units, going by data from Cushman & Wakefield data. The government is slashing the number of residential units (including executive condominiums or ECs) for the confirmed list by some 15 % from the first half of the year to 1,715, making it the lowest since H1 2016's 1,560 units, said Cushman & Wakefield.

Confirmed list sites are those launched for sale at pre-determined dates, mostly through tenders. Reserve sites, on the other hand, are made available for application and then put up for tender when a developer has indicated a minimum price which is accepted by the government.

Explaining the decision to cut the confirmed list supply, the Ministry of National Development (MND) noted a "large supply" of around 44,000 private housing units in the pipeline that remain vacant, plus around 24,000 existing private housing units standing vacant.

"In contrast, demand has continued to fall since the introduction of the property market cooling measures in July 2018. Overall transaction volume declined for the third straight quarter in the first quarter of 2019, while developers' demand for land has also moderated."

Ong Teck Hui, senior director of research and consultancy for JLL, said the cut in confirmed list supply "reflects concerns over the substantial supply of unsold units in the pipeline that resulted from the robust collective sales in 2017 and first half of 2018. The reduction of the supply of private homes in the confirmed list is appropriate, given the increasingly bearish economic and business outlook."

The market has also observed a moderation in demand among developers for private residential land, Cushman & Wakefield's senior manager for research Wong Xian Yang said.

"Though the slight pull-back of supply is not expected to have a material impact on the current market, it bodes well for the medium- to long-term stability of the private residential market. Unless a good deal comes along, developers are likely to adopt a wait-and-see approach for 2019 and concentrate on selling off existing inventory."

In all, there are five confirmed list sites and eight reserve list sites for H22019, compared to the first half's five on the confirmed list and nine on the reserve list.

All the confirmed list sites for H2 are residential, though just one of these - on Irwell Bank Road in River Valley - is a new site. A site on Canberra Drive from the first half of 2019's GLS programme has now been split into two parcels as part of H22019's confirmed list, one yielding 220 units, and the other, 455.

Desmond Sim, head of South-east Asia research for CBRE, said of this move: "On the back of the growing unsold inventory, developers are observed to be restrained on high-unit yielding sites in light of impending ABSD (Additional Buyer's Stamp Duty) remission rules on development sales success. The site dissection has made the sites more palatable for developers to consider." Another site from H12019 now on the confirmed list for H2 is at Bartley Road/Jalan Bunga Rampai.

Mr Ong said: "Being a bite-sized site of 0.47 ha generating about 115 units, the absolute land price will be affordable, so competition could be more widespread."

Meanwhile, he thinks that the EC site at Fernvale Lane could pull in more moderated bids because "the supply is not as tight as before and market conditions could be less buoyant". That site could yield 480 units.

On the reserve list, there are four residential sites: Dairy Farm Walk, Dunman Road, Hillview Rise and Tampines Street 62 (an executive condominium or EC site). There are also three white sites - Marina View, Woodlands Avenue 2 and Kampong Bugis. A River Valley Road hotel site will also be on the reserve list.

The reserve list sites can yield a combined 4,715 private residential units (including an estimated 1,000 units from the first phase of the Kampong Bugis project), 92,000 sqm gross floor area (GFA) of commercial space and 1,100 hotel rooms.

Adapted From The Business Times, June 7 2019