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Re: PRIVATE PROPERTY TO HDB
Fm ST, 11 Sept 2003
Property market will be kept stable
WE REFER to the letter, '7 ways to ease impact of CPF cuts on property' (ST, Sept 5), by Mr Tan Kok Liang.
Mr Tan's suggestions to ease the impact of CPF cuts on residential-property prices centre on controls in the supply of new housing units to support prices of residential properties.
We agree that a residential property, whether private or public, is an important asset to Singaporeans. The value of this asset is of primary concern to home-owners.
However, this concern has to be balanced with the need to ensure affordable housing for new home-owners, who will also have the same aspiration to own their own homes.
The Government's objective is thus to have a stable property market. It is not in our interest for property prices to plunge; neither is it prudent to prop up prices to maintain high asset values.
With regard to the effect of CPF cuts on housing, the immediate result may be that households have less funds for the purchase of properties. However, CPF funds available for the purchase of properties is just one factor affecting demand. The main objectives of the CPF cuts are to enhance our cost competitiveness and position our economy for a renewed period of growth when the external economic conditions improve.
With economic growth and greater job opportunities, more Singaporeans are likely to be able to afford private housing in the longer term. The prices of residential properties may rise in tandem with incomes in this context.
The Government monitors the property market closely. We ensure the stability of the market by providing a sufficient supply of private residential land to meet end-users' demand for space. The prices of private residential land put up for tender are then determined by market forces, based on supply and demand.
As there is currently still demand for private housing, it is not prudent for the Government to totally cut off supply by stopping land sales for residential development, as suggested by Mr Tan.
A better approach to achieve a stable private residential-property market is to operate the government land sales (GLS) programme in a way that allows the market the flexibility to adjust supply to match demand.
It is for this purpose that the Government introduced the Reserve List for the GLS in June 2001. A site on the Reserve List will be put up for tender only if a developer applies for it to be sold, and offers an acceptable price.
In this way, the market has more flexibility to decide on the appropriate level of supply, in response to demand. Prior to June 2001, there was less flexibility as all sites were sold through the Confirmed List, where sites were put up for tender according to a fixed schedule. Since October 2001, in response to weaker economic conditions, the Government has suspended the Confirmed List.
The Reserve List has worked well so far in allowing the market to adjust supply to match demand, and to prevent oversupply in the market. For example, developers triggered the sale of only one residential site in the first half of this year, in response to the weak economy caused by the Iraq war and the Sars outbreak.
The Reserve List system is more flexible than the Certificate of Entitlement scheme suggested by Mr Tan, as it allows developers to apply for more sites if there is demand and insufficient supply.
Likewise, in the case of public housing, the Housing Board's building programme is designed to match the overall demand. To better manage the supply of new flats and ensure that demand for flats is genuine and not speculative, all new flats for public applicants are currently offered for sale through the Build-to-Order system. Construction of the flats will proceed only if the take-up rate is good.
Mr Tan suggested that the conversion of other types of property to residential use be regulated to prevent oversupply. The Government currently regulates the conversion of property based on planning considerations, ie, whether a residential development is suitable in the area.
However, the economic decision as to whether to convert the properties from one use to another lies with developers, based on their assessment of the demand and supply situation. This approach should remain.
We would, however, like to assure Mr Tan that the Government takes into account all sources of supply, including the conversion of properties such as hotels to private residential properties, in determining the amount of residential land to release under the GLS programme each year.
On the suggestion that old properties be upgraded to meet new demand, the HDB's Main Upgrading Programme, alongside other improvement programmes such as the Selective Enbloc Redevelopment Scheme, the Interim Upgrading Programme and the Lift Upgrading Programme, are all part of the Government's continual efforts to renew the older HDB estates.
In the case of private properties, however, it would again be best left to the market to decide if it makes economic sense to upgrade the old properties.
Mr Tan also suggested that the Government free up more land for industrial and commercial use to bring down business cost. We would like to clarify that the Government's Reserve List currently has seven commercial/white/mixed commercial-residential sites which could potentially supply 103,500 sq m of commercial space, and six industrial sites totalling 13.9 ha. These sites are sufficient to meet any foreseeable surge in demand for commercial and industrial space.
With ample supply of such properties, rental costs for businesses have come down. Since the second quarter of 1996, rentals of industrial properties have fallen by 50.4 per cent, while rentals of office and shop space have fallen by 41.5 per cent and 33 per cent respectively.
The rental rates of office and shop space in Singapore are, according to international ranking, already competitive compared to other major cities.
In conclusion, we would like to assure Mr Tan that the Government would make every effort to maintain a stable property market, and to ensure that costs are kept competitive.
JULIA HANG (MRS)
Assistant Director/Public Affairs
Ministry of National Development