The Ministry of National Development (MND) has issued a statement to rebut what Mr. Simon Cheong, president of Real Estate Developers’ Association of Singapore (REDAS), had said on Wednesday.
It has defended its Reserve Price system for state land tenders, and disagrees that it has constrained the property market in the country.
Mr. Cheong cited the Ten Mile Junction and Tampines sites, saying they were released for sale, but were not awarded at "market prices".
He also said "the higher bid prices generated more revenue for state coffers but also accentuated the demand-supply mismatch."
However, the ministry totally disagreed with the REDAS president’s view.
First, it said it is questionable if the awarding of the two sites at the low bid prices in 2008 would have moderated the prices of properties or simply permitted the bidders to achieve a higher profit margin.
“The government has a responsibility to safeguard the nation’s assets, including government land, and to be able to extract the highest value from those land. So the government does have a duty to try to balance a number of factors, not just smoothing out the market volatility, but also to ensure that the lands are sold at a fair and open market price,” said Mr. Nicholas Mak, a real estate lecturer from Ngee Ann Polytechnic.
MND also said that the successful sale of sites under the Government Land Sales (GLS) programme has not been deterred by the Reserve Price system.
In fact, it said that seven residential sites were sold through the Confirmed List in 2008.
The two sites at Ten Mile Junction and Tampines were some of the few exceptions.
Thirdly, the government stressed that the potential yield from these two sites is rather small (projected at around 800 units) compared to the total supply of 60,476 uncompleted private housing units from projects in the pipeline.
It is then arguable if the added supply from the award of these sites in 2008 would have, in any way, affected the current property prices.
Lastly, the government does not use the Reserve Price as a rigid formula, but as a guide to decide whether to award a sale site.
On the two mentioned sites, the ministry said that it is not convinced that the bids represented a fair market value, rather were opportunistic ones, as the sites received very few bids that were exceptionally low.
Some industry observers agree.
“If the developer were to buy the land at a very low price, there is no guarantee that he will sell the new development at a very low price. Chances are that if the market were to recover, and prices start to escalate, the developer will sell the new project at as high a price that he can achieve in the market. And he will congratulate himself for achieving that (huge) normal profit,” said Mr. Mak.
In its statement, the ministry said that it is the objective of the government to maintain a healthy and steady property market.