Paying attention to low participation in State Land Tenders

The authorities in this area work hard to ensure an adequate supply and that prices are not pushed up.
In order to avoid speculation, and to ensure that home buyers are financially prudent, a variety measures have been introduced, including loan-to-value, the total debt-service ratio, the mortgage-service ratio, and Additional Buyer’s (ABSD), as well Seller’s Stamp duty.

Housing and Development Board, or HDB, flats will be built in greater numbers to meet rising demand. HDB buyers who choose prime locations for their HDB homes may also face more restrictive resale rules.

Government Land Sales, a program that allows the sale of residential lots in private housing developments, is one way to guarantee a supply.

Private developers build the private homes while the government builds HDB blocks. What this means, is that private home supply could fall short of what government expects with its land sales program.

In February, Urban Redevelopment Authority(URA) refused the sole bidder for the white Marina Gardens Crescent Site, which had been offered for sale in the ConfirmedList of the GLS H1 Programme 2023. The bid price, slated for residential, commercial, and 775 private homes development, was deemed to be too low.

In the current market, GLS housing sites tend to be more popular than other GLS housing sites. In addition, each of the Confirmed Sites with Housing Components that were subject to tenders on April 4 received only one bid.

City Developments Ltd. C09 +0.66%, a joint venture of GuocoLand and Hong Leong Holdings (F17 +2.04%), was the only bidder to win a Zion Road building site.

The two sites bids were well below market expectations.

One consortium expressed an interest in the Jurong Lake District GLS Master-Developer GLS Site, which will be used mostly for offices, homes and other commercial purposes. CapitaLand Development, CDL, Frasers Property – TQ50%, Mitsubishi Estate, Mitsui Fudosan Asia and Frasers Property – TQ50% submitted two joint proposals with different concept suggestions for this site. The tender closes on Mar 26.

Uncertain demand and high construction costs combined with interest rates could be the cause of negative feelings among private housing developers.

The demand for homes in prime areas has been affected by the increase of ABSD to 60% for non-PR foreigners, Singaporeans and permanent residents (PRs), who purchase multiple homes. ABSD applies to non PR foreigners was doubled.

Are state land bids attracting top bids that the government finds unacceptable – or even if they do not receive any bids – increasing?

If the Confirmed List site GLS housing supply does not materialise as planned, private housing could become inadequate in a matter of years. In particular, the market for residential enbloc sales is very quiet. As a result, there are fewer available redevelopment sites.

Because new houses take a couple of years to build, it would be difficult for any shortfall to be corrected quickly.

Rents and prices can rise dramatically if there are not enough private homes. This impacts young locals seeking to purchase private properties. Singapore could also lose out on attracting the talents it is looking to attract from abroad if there are no suitable homes for lease.

The next government bid for a residential site will be closed on May 14. It is located at Holland Drive. This tender could have an excellent number of offers and prices.

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Even so, it may be time for the authorities and developers to work together to find ways of increasing the level interest in GLS Confirmed List housing sites.

ABSD rates should be lowered to 30 per cent for non-PR foreigners and for locals. The government could still collect revenue by imposing a 30% ABSD on foreigners who do not have PR status.

Or, perhaps you can tweak the way GLS websites are sold to ensure better price discovery.

As things stand, developers who want to bid on state-funded housing sites are usually asked to submit sealed bids at a specific time and date. Sites will then be awarded based solely upon price.

The interested parties of the Confirmed List housing sites could meet on a set date at a predetermined time to conduct an open bid process.

Let representatives raise their hands, and announce the bids of those interested. Other parties may offer higher offers until a final price is set. The government may then have some time to assess whether or not the price of that bid is acceptable.

It may encourage developers who have been hesitant to bid on a project to come forward and place a bid.

Currently, private housing developments may have a net profit margin around 10%. In terms of risk and reward, this return could not be attractive.

Be aware that yields have risen on many instruments with low risk. Housing developers take on many risks.

Consider also that property groups have a wide range of choices for how to deploy the capital. These include non-residential assets here and overseas.

Many property groups can afford to be slow in their property development. They have regular incomes from rental properties that help them pay the bills. Loss-making projects can be damaging to your reputation and financial health.

Profit-driven developers must bravely take the initiative to build enough private housing to meet demand. If developers are not active, it will be harder for residents to achieve the dream of living a condominium lifestyle.

The authorities should take note of the low participation rate in land tenders by state for housing, and prepare to act if necessary to entice developers to bid.