Are Singapore developers forced to walk a tightrope?
May 21, 2017
Government Land Sales for residential sites in Singapore just crossed the S$1 billion mark. A 99-year leasehold site in Queenstown Stirling Road was sold at a top bid of S$1.003 billion.
The winning consortium is China’s Nanshan Group and Logan Property (a Chinese developer listed in Hong Kong). Nanshan has been eyeing at the Singapore property market for long. In the past 12 months, it participated in 8 of 11 tenders in Singapore’s land auctions.
What is the role of the government?
In Singapore, land use is regulated by Singapore Land Authority and Urban Redevelopment Authority (URA). They make decisions on zoning, plot ratio and development charges which have direct impact on the value of the sites.
The Chief Valuer at IRAS sets a minimum reserve price on the land parcels based on recent property transactions. URA then sells them to developers through public tenders. The sites will be awarded to the highest bidders if they don’t fall below 85 percent of the reserve price.
Chesterton Singapore reported that land prices have increased by an average of 30 percent each year from 2011 to 2014. Land auction data from URA also show that suburban areas such as Tampines, Clementi and Jurong West have land prices almost doubled from 2008 to 2014.
The government can indirectly influence the selling price of new sites in at least 3 ways:
1) Increase or reduce the release of new sites for public auction;
2) Impose or relax cooling measures to restrict or stimulate the property market; and
3) Launch of public flats to meet the demand for public housing.... read more