Recent en bloc fever will not necessarily lead to higher prices, said the Minster of National Development Lawerence Wong in Parliament today.
Aggressive bidding by developers had significantly raised land prices. Developers are observed to be paying a 29 per cent premium on land prices, as compared to 2015. This is happening in a soft property market, still subject to tight cooling measures. About 2,700 private residential units have been sold en-bloc in 2017 so far, more than four times that of the 600 units sold last year.
Minister Wong doesn’t agree. He highlighted that properties are still subject to the Additional Buyer’s Stamp Duty (ABSD). Developers must build and sell new units within five years of the site being awarded or incur an additional 15% of the site’s purchase price.
This would mean that the developers must build and sell quickly, this would ensure developers prices their projects reasonably.
Wong said that a second reason that en bloc sales had been successful in 2016, may have encouraged more owners of ageing residential projects to initiate the process in 2017 to monetise their assets.
Property observers remain to be convinced.
“Developers are not stupid and they won’t build at a loss. Buyers will have to pay for it, that means higher prices”, said Benedict Koh, a property agent. “Even worse, they may build smaller units to maximise profits. Then you’ll end up with crowded projects and higher PSF costs”.
Another agent thought that it was far too early to be bullish on the property market. “Although property prices have cooled a little, we must remember they’re down only 11% since the last peak in 2013. On the whole, prices rose above 60% broadly,” said Wendy Tin, another property agent.
The Minister said that there will be no immediate plans to ramp up land sales to meet developers demand. The authority will consider several factors such as supply of new units, population, income growth and property market conditions before deciding on the quantum of land to put out.
Said Mr Wong: “The Government will continue to monitor the overall trends and developments closely, and take appropriate actions to maintain a stable and sustainable property market.”