SINGAPORE - It will be a tough call for Ministry of National Development (MND) to determine the supply of land for private housing development for H1 2013, as it balances the risks of looming oversupply amid an economic slowdown with record home sales by developers and their voracious appetite for land.
One school of thought reckons that clipping land supply could be the medicine to cure property binging, as current strong home sales are supply-led, ie, by developers' launches - at a time of negative real interest rates, strong liquidity and as investors seek a safe anti-inflation hedge in property.
"The quandary the authorities will face is that in the short run, demand chases supply. However, in the long run, the laws of supply and demand do influence prices, especially when the supply becomes physically completed," said Savills Singapore research head Alan Cheong.
Some have thus argued a bearish case from 2014 onwards, with 18,350 private homes expected to be completed in that year alone.
That implicitly means supply should be curtailed early to prevent any price mishaps.
"Unfortunately, should supply be pulled back at a time when prices are still trending up, it will re-ignite another round of buying frenzy. The situation is not helped by the fact that we are also seeing land costs rise by double-digit percentage rates at recent state tenders compared with sites sold less than a year ago."
Mr Cheong believes that MND will probably stick to the current half's quantum of residential land for the H1 2013 Government Land Sales (GLS) Programme - on both confirmed and reserve lists.
In both H1 and H2 this year, the GLS Programme provided land for about 7,000 private homes, including executive condos (ECs), under the confirmed list plus the same quantum on the reserve list.
Confirmed-list sites are launched for tender according to a pre-stated schedule, while sites on the reserve list are launched only upon application by a developer, accompanied with an undertaking of a minimum bid that is acceptable to the state.
Ong Teck Hui, Jones Lang LaSalle's national director, research and consultancy, agrees that it will be a tough call for MND.