Attention needed to lack of participation in GLS land tender

It is important that the authorities maintain a steady supply of houses and keep prices stable.
The government has taken a number of measures to prevent speculation, as well as to encourage financial responsibility in homebuyers. These include the loan to value ratio (LTV), total debt servicing, mortgage servicing, Additional Buyer’s stamp duty (ABSD) or Seller’s stamp duty.

Housing and Development Boards (HDBs) are building more flats to meet demand. However, buyers of HDBs in prime locations may face tighter restrictions for resale.

In order to ensure a sufficient supply of private housing, the Government sells residential sites through its Government Land Sales Programme (GLS).

While the government constructs HDB flats for the public, private developers are responsible for building private homes. The government may not be able to meet its expectations in terms of the number of private homes built.

The Urban Redevelopment Authority (URA), in February, rejected the single bid for a white site located on Marina Gardens Crescent that had been put up for sale through the Confirmed Listing of the H1 2023 GLS Programme. The bid price was too low for the site that is to be used for residential and commercial developments with approximately 775 private houses.

It is becoming more common for GLS sites with housing components to receive only one bid, rather than several. On April 4, the tenders closed for the two Confirmed-List sites that have housing components.

City Developments Ltd. (CDL) and Mitsui fudosan were the only bidders for the Zion Road site. The site will be used to build serviced apartments and homes for long-term stays. A joint venture between GuocoLand F17 +2.04% and Hong Leong Holdings was the single bidder for the Upper Thomson Road site.

Both sites’ bid prices were lower than expected.

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A consortium showed interest in the Jurong Lake District GLS master-developer site. This site will be primarily used as offices and homes. CapitaLand Development, CDL, Frasers Property TQ5 0%, Mitsubishi Estate, and Mitsui Fudosan Asia submitted two joint offers with different concept ideas for this site. The tender was closed on 26 March.

The negative attitude among private housing developers may be a result of high construction costs and interest rate coupled with an uncertain demand.

In April 2023, the ABSD rate will be raised for Singapore citizens or permanent residents who buy more than one home and for foreigners not PRs. ABSD applied to non-PRs doubled to 60%.

Do state land auctions attract top bids that are unacceptable to the government, or do they draw no bids?

If the Confirmed List of GLS sites do not produce new private housing, it could lead to an insufficient supply within a few year. The residential en bloc market is notably quiet, and fewer sites are becoming available for redevelopment.

A shortfall in housing completions is difficult to correct quickly, as new homes can take several years to construct.

A lack of private homes can cause sharp price and rental rate increases. This can affect young, motivated locals who want to buy a private home. Singapore may also be unable to attract the talent it wants from abroad due to the lack of homes available to rent.

The next government auction for housing sites closes on the 14th of May. It is for a location on Holland Drive. There may be a good number of bids for this tender.

Still, the authorities should explore how to boost the level of interest from developers in the Confirmed list GLS housing site.

Lowering ABSD rates can ease concerns over the private housing market. This is especially true for foreigners who are not PRs but buy any home. If the ABSD was re-imposed at 30% on non-PR foreign buyers, could this reduce the demand for private housing?

Perhaps you could change the way GLS site are sold in order to improve price discovery.

Currently, developers who bid for housing sites through state tenders must submit their bids in sealed envelopes before a specified date and hour. Sites are generally awarded on the basis of only price.

A possible option is to have interested parties gather at a certain time and place for an open bidding process.

Let representatives from interested parties raise hands and announce bids. You can continue to raise your bids as long as there is no final bid. The government will then have time to determine if the bid price is acceptable.

By doing this, you may encourage more cautious developers to put in a bid rather than refrain from bidding.

The net profit margin of private housing projects could be 10 percent today. Such a return is not attractive on a risk/reward basis.

Take into account that many low-risk assets have seen their yields rise. Housing developers are exposed to many risks. For example, they could be liable for a large clawback of ABSD refunds if homes built by them do not sell within the specified timelines.

Think about the fact that property groups are able to choose from a variety of options for where they want to deploy their capital. This includes non-residential real estate here in the United States, as well overseas properties.

Different property groups also have the ability to slow down on development because they can rely on recurring income from their investment properties. Losing money on a project can cause serious financial damage and undermine your credibility.

To ensure that there is a sufficient housing supply, we must have profit-driven developers bravely build new homes. Many residents may find it more difficult to live the condo lifestyle if developers remain inactive.

The authorities must pay attention to the lack of participation by developers in state land auctions for housing sites and act quickly to encourage more participation.

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