Singapore property: government policies to blame for oversupply of flats, developer says

Sherman Kwek, CEO of City Developments, says penalties on companies that fail to build and sell within five years from acquiring land should be relaxed to ease oversupply

Singapore has almost 32,000 flats either finished or under construction and the central bank last month warned prices could be threatened

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Singapore has almost 32,000 either finished or under construction flats in the pipeline. Photo: Handout

Published: 3:00pm, 11 Dec 2019Updated: 4:55pm, 11 Dec 2019

Singapore’s property glut is an unintended consequence of government measures to force developers to build and sell flats quickly or face stiff penalties, according to City Developments.

The city state’s second-biggest home builder has come out swinging against a rule that imposes a levy on companies if they don’t complete construction and sell all units within a period of five years from acquiring land.

Chief executive officer Sherman Kwek said the timeline should be lengthened to seven or even 10 years “so that it reduces the immense pressure on developers and prevents the current supply glut from worsening”.

Singapore has almost 32,000 either finished or under construction flats in the pipeline. It’s a glut market watchers say could take years to clear. Last month, the central bank warned the oversupply also threatens to push down prices.

Far East Organisation declined to comment on the property glut while CapitaLand didn’t immediately respond to a request for comment.

Kwek said that after the most recent cooling measures in July 2018, the penalty now stands at a “petrifying rate” of 31.25 per cent, comprised of a 25 per cent penalty compounded at an interest rate of 5 per cent per annum for five years. Here is an excerpt of a Q&A with Kwek, edited for length.

How did we get here?

Market sentiment for the residential sector in Singapore was very depressed during the four-year period spanning mid-2013 till mid-2017. This was a result of the initial hike in additional buyers’ stamp duty (ABSD) and the implementation of the total debt servicing framework in 2013, both of which were bitter pills for the market to swallow.