More land but market copes
MARKET elasticity in Singapore's private housing sector will act as a prop as the Government continues releasing land parcels for development.
'There's not going to be any crash, that's a typical overreaction,' Jones Lang Wootton's Alan Choo said.
'We tend to overreact, particularly when the securities houses say there is going to be a drop of 25 per cent, or some other figure.' Mr Choo defended government moves to release more land on to the market, given that tight supply would inevitably lead to further price increases in the sector. But he acknowledged that some of the originally proposed land-parcel launches may have been curtailed.
'The government has already held back on about five per cent of intended land releases for 1995, a fact that has not been widely publicised,' Mr Choo said.
Two tracts of land that had not appeared for tender were at Mandai and Mount Faber.
If that was the case, then market projections for private housing supply over the next few years would be vastly inflated.
Mr Choo did not say whether the government was reacting to the current soft market or whether the launches were late.
The Ministry of National Development announced earlier that it would release 86.27 hectares of land over 30 new sites for the development of 1,500 private housing projects in 1995.
These projects encompass 105,000 individual units, which will push the share of private housing from 7.5 per cent to 11 per cent of total housing stock.
By a year officially termed 'x' in long-term government planning, it is intended that 30 per cent of the population will be privately housed, compared to 17 per cent currently.
'We still have 87 per cent of the population in public housing and a lot of these people are now more affluent.
'They want to upgrade, so there has to be more housing in the private sector to meet this demand,' Mr Choo said.
Public housing in Singapore is administered by the Housing Development Board (HDB).
Since 1989, Singaporeans, who own HDB flats, have been permitted to buy private residential property for investment provided they remain tenants of public housing.
Those who have taken advantage of this new legislation have gained immeasurably from investment returns.
Compounded growth in private property values was 42 per cent in 1994, up on 37 per cent in 1993.
In Hong Kong, many home buyers experienced 300 per cent growth in their investments over a corresponding period.
'It was the new law that really opened the private sector up,' Mr Choo said.
'We're talking about the housing pyramid here. The two markets are now moving in tandem, which was not the case until the end of 1980s.' While he acknowledged that on-coming supply had caused a downward adjustment in the prices of lower to mid-range properties, he remained bullish on projects at the top end of the private residential market, a popular domain with foreign buyers. Prices in this sector could escalate by between 20 and 25 per cent over the next five years, he said. Projects like the Four Seasons and Richmond Park, where 30 to 40 per cent of investments came from foreign buyers, represented good opportunities. This was a sentiment shared by other market observers.
Even the slow take-up of units at the luxury Pebble Bay condominium was not a true reflection of market sentiment, according to Joan Chan, valuation manager for Raine & Horne International.
'There is a big gap between the sizes of the units at Pebble Bay - from 1,300 square feet to 1,800 square feet. For some buyers that might have been too big or too small if they were looking for something in between,' she said.
Situated on the east coast of Singapore, Pebble Bay is developed and marketed by DBS Land.
It received extensive pre-launch publicity - the principal sales pitch being that it is Singapore's first sea-front condominium project - although latest figures indicate only 60 per cent of the units have been taken in four months of sales.
Ms Chan anticipated a 15 per cent downward adjustment in prices of lower-end private housing.
Peter Churchouse, of Morgan Stanley, a securities firm, was more bearish.
He said a 20 per cent downturn in the next 12 to 18 months was not out of the question, if all the intended supply was pushed through.