Time to take note of low participation rate in land auctions

Authorities here are working hard to maintain a sufficient supply of housing and to make sure that prices don’t run away.
To prevent speculation and ensure financial responsibility among homebuyers, various measures were implemented, including the loan-to value ratio, total debt service ratio, mortgage servicing rate, Additional Buyers Stamp Duties (ABSD), and Sellers Stamp Duties.

Housing and Development Board flats are being constructed to meet the growing demand. Buyers of HDB apartments in desirable locations will face stricter restrictions on resale.

The government makes sure that there are enough residential sites available by selling them through its Government Land Sales programme (GLS).

Private developers build private homes, but the government only builds HDB flats. This means that the private housing supply may be less than what the government had hoped for from its land sale programme.

The Urban Redevelopment Authority rejected in February the only bid submitted for the white Marina Gardens Crescent site, which was listed for sale as part of the Confirmed list for the H1-2023 GLS Programme. The price of the bid for this site, which is slated to be developed for commercial and residential purposes with 775 estimated private homes, has been deemed too low.

On the market today, GLS sites that have residential components are increasingly attracting only one bid instead of multiple. The tenders that closed on April 4 for each of the two Confirmed list sites with housing component also only attracted one bid.

City Developments Ltd. : C09+0.66% (CDL), a joint venture between GuocoLand: F17+2.04% and Hong Leong Holdings, was the only bidder on a Zion Road property that will be used for homes and serviced apartments for long-term residents.

The bid prices for both sites were below the market expectations.

One consortium expressed interest in the tender for GLS’s Jurong Lake District site. The site is intended to be primarily used for homes and offices. CapitaLand Development submitted two bids for the site, with different concepts. Frasers Property: TQ5 0.0%, Mitsubishi Estate, and Mitsui Fudosan Asia were also involved. The tender ended on March 26.

Negative sentiments among private home developers could be due to high construction costs, interest rates and uncertain demand.

The April 2023 increase in ABSD will affect the demand for prime-location homes. This is because Singaporeans and Permanent Residents (PRs) who buy multiple homes and non-PR foreigners who purchase any home. ABSD for non-PR foreigners has doubled, from 30% to 60%.

Grand Dunman Pricing has been released and be amazed by the attractive pricing awaits.

Is the risk of government rejecting top bids or not receiving any bids increasing?

In a few short years, if the new housing supply planned from Confirmed List sites GLS does not materialise there may be an inadequate supply of private housing. It is particularly true, as the residential en-bloc sale market has been sluggish, which means that fewer redevelopment areas are available.

It would be hard to quickly rectify any shortfalls in housing completions because it takes a few more years to build new homes.

Insufficient private housing can lead to sharp increases in rental and price rates. It is a problem for young Singaporeans who are looking to purchase private homes. The lack of rental homes may deter the foreign talent that Singapore wants to attract.

The next government housing tender closes May 14 for a site located on Holland Drive. This tender may have a healthy number of bids, and the bid prices are likely to be competitive.

It is still possible that the authorities could explore new ways to increase the interest of developers to Confirmed GLS housing sites.

The ABSD rate can be lowered for foreigners, PRs and locals who buy multiple homes or any home. Can a 30 percent ABSD be levied on foreign non-PR home buyers to reduce demand but not to kill it?

You could also change the way GLS sites sell to ensure that you get a better price.

Developers bidding on housing sites for state tenders will typically be asked to submit sealed envelopes of their bids by a certain date and time. The sites are usually awarded solely on the basis of price.

It is possible for those interested in housing on the Confirmed List to meet at a specific time and date for a public bidding process.

Let the representatives of all interested parties raise their hand and announce their bids. The other parties can offer higher bids up until the final bid. After a certain period of time, the government can decide if this bid price is acceptable.

This will encourage developers who are hesitant to bid to do so.

Currently, the profit margin for private housing developments can be as high as 10%. A return of this magnitude may not be attractive from a risk/reward perspective.

Also, consider that yields for many low-risk investments have increased. Housing developers face many risks. They could lose ABSD rebates if their homes aren’t sold in the prescribed timeframe.

Property groups can choose to invest in non-residential property here as well as overseas.

Diverse property groups are also able to afford to take their time with property development as they receive a regular income from investments properties. A loss-making property development project can damage your credibility and cause financial hardship.

We need developers who are motivated by profit to step up and build more homes in order to maintain a sufficient supply of private housing. Inactivity by developers will make it difficult for many residents to achieve their dream of living in a condo.

Authorities should be alert to the low participation of developers in tenders to acquire state-owned land for housing and ready to take action to increase participation.