In a statement issued yesterday the Singaporean Government questioned the keynote speech at the launch of the Singapore Residential Price Index yesterday, Where REDAS President Simon Cheong questioned the need for Government intervention to stop private residential prices from rising. MND stated that it would like to respond to the key points he raised as stated below.
1 The Government's objective is to maintain a steady and healthy property market where price movements are supported by economic fundamentals. This is important as a stable market matters to the well-being of Singaporeans and the economy. A property market bubble, if allowed to form, may not only impact housing affordability but also severely impact the economy when it bursts. In carrying out its role, the Government has to take into account the interests of all stakeholders, especially home seekers and owners and the economy at large.
2 We do so mainly by ensuring an adequate supply of land to meet demand and by providing timely and comprehensive real estate information to the public. When necessary, the Government will also introduce measures to dampen market exuberance and prevent prices from running ahead of economic fundamentals.
3 Mr Simon Cheong cited 2 GLS sites that were not awarded in 2008 as examples to illustrate that market forces were not allowed to act freely and were constrained by the Reserve Price system. As these two sites were recently awarded at much higher prices than the bids in 2008, he argued that if the Government had awarded the sites at lower prices in 2008, it could have helped to moderate recent property price increases.
4 MND disagrees totally with his view.
5 Firstly, it is arguable if awarding the two sites at the low bid prices in 2008 would have moderated property prices or simply allowed the bidders to achieve a higher profit margin.
6 Secondly, the Reserve Price has not deterred the successful sale of sites under the Government Land Sales (GLS) programme. In 2008, seven residential sites, which could yield a total of 2,464 units, were sold via the Confirmed List. The Tampines and Ten Mile Junction sites, which were released for sale via the Confirmed List but not awarded, were amongst the few exceptions. A total of 71 sites have been successfully triggered and sold under the Reserve List system since it started in 2001.
7 Thirdly, the potential yield from the two sites is small – estimated about 800 units – compared to the total supply of 60,476 uncompleted units of private housing from projects in the pipeline (as at the 4th quarter 2009), of which 34,234 units are still unsold. It is thus questionable if the added supply from the award of these sites in 2008 would have affected prices today in any way.
8 Finally, a Reserve Price is necessary, as it is Government’s duty as the custodian of state land to ensure it obtains a fair market price for a site. But the Reserve Price only serves as a guide, and is not a rigid formula for the Government in deciding whether to award a sale site. The Government had awarded sale sites in the past even when the top bid was below the Reserve Price. However, for the two sites cited by Mr Cheong, the Government was not convinced that the bids represented fair market value rather than opportunistic bids, as there were very few bids for the sites, and the bids were exceptionally low.
