Govt to continue easing up on housing supply next year

By Janice Heng, The Straits Times, 21 Oct 2014

BOTH public housing supply and land sales for private property will continue to slow next year, National Development Minister Khaw Boon Wan said yesterday.

However, married couples and their parents will get more help to live close together when buying new Housing Board flats.

As for calls to re-examine property cooling measures, he reiterated that this was not the time.



Mr Khaw addressed these topics in a blog post and on Mandarin television news programme Hello Singapore last night.

There will be 25 per cent fewer Build-To-Order (BTO) flats next year. After BTO supply was ramped up between 2011 and last year, the pace slowed by 10 per cent this year to 22,400 units.

The HDB has decided to slow things down further after studying recent BTO application rates. In recent years, there have been six launches a year of an average of 4,000 units. From next year, there will be four a year, with a total of about 16,000 new units.

"This should be sufficient to meet demand, without causing a glut in the public housing market," said Mr Khaw.

On the cut, R'ST Research director Ong Kah Seng said: "I don't think it is too drastic."

But chief executive of real estate firm Century21 Ku Swee Yong thinks slowing down to 18,000 units first may be better.

As for private property, Mr Khaw noted that the Government has been reducing land sales for executive condominiums and private condominiums.

"This year, we made a small adjustment of reduction. Next year, we will go a bit further," said Mr Khaw, adding that exact figures have yet to be finalised.

He also announced that couples and their parents will get more help to live near each other. From next month's BTO onwards, "a certain proportion" of the flat supply will be set aside just for them. In addition, priority will be given to couples applying to live with their parents.

Priority will also be given to parents who own a flat in a mature estate, but apply for a flat in a non-mature estate to live near their married child.

Asked to evaluate his three years as housing minister, Mr Khaw said they have been "quite satisfying", adding: "We are now seeing results."

He added it was "particularly satisfying" to help newlyweds get flats quickly, but added: "Now that I've delivered my side of the bargain, I hope they'll deliver their side - which is move in quickly and have children."

Analysts hail Govt’s move to further cut housing supply
Concerns over possible upswing in prices unfounded, but resale HDB market could see reprieve
By Lee Yen Nee, TODAY, 22 Oct 2014

The Government’s move to further reduce the supply of public and private housing next year comes at the right time, as activity in both segments has taken a beating because of the ramped-up supply over the past few years, showing that the current rate of launches is not healthy for the market in the long run, analysts told TODAY.

And any concerns that the reduction in supply could lead to a sudden upswing in prices are unfounded, they said, as the cooling measures will continue to contain prices.

Managing director of Chesterton Singapore Donald Han said: “I think it’s about the right time to start tweaking the supply, though the (impact) could perhaps only be felt early next year, so we will still see a continual drop in prices in the next two to three quarters before we start to see a stabilisation.”

His comments come after Minister for National Development Khaw Boon Wan announced on Monday that the government would reduce the supply of Build-to-Order (BTO) flats by 25 per cent to about 16,000 units next year from this year’s 22,400 units.

During the record construction programme from 2011 to 2013, more than 25,000 BTO flats were launched per year, totalling 77,000 units, to meet pent-up demand.

Mr Khaw also said fewer sites will be put up for sale via the Government Land Sales (GLS) programme, although he did not go into details.

Monday’s announcement follows a continuing fall in prices of both resale Housing and Development Board (HDB) flats and private homes.

As of the third quarter this year, resale prices of HDB flats are about 7 per cent lower than the peak in the second quarter of 2013, according to latest flash estimates. In the private segment, prices have fallen about 4 per cent from the high in the third quarter of last year.

Transactions have also dwindled. About 8,000 HDB flats changed hands in the first half of 2014 compared with more than 9,000 units a year ago. In the same period, sales of private homes fell to about 7,000 units from 14,700 units.

With fewer BTO flats next year, Mr Han said, the resale HDB market could see some reprieve.

“The HDB market has seen downslide in resale prices and one of the main reasons is the large dosage of BTO flats … Prolonged over-dosage of BTO at over 20,000 is definitely not healthy. By tapering down the BTO supply, hopefully that will bring some equilibrium to the market,” he said.

Application rates for BTO have also stabilised in recent exercises — an indication that pent-up demand has largely been met, noted Mr Tan Kok Keong, chief executive of REMS Advisors.

On the private housing segment, he said that fewer GLS sites would not have an immediate impact on prices and sales volume given the current weak demand and the estimated 20,000 units that are expected to be completed each year from 2015 to 2016.

“I don’t think it will lead to developers bidding more aggressively, because it is well documented that market participants expect a build-up in supply in 2015 and 2016, so developers will be wary of that and bid at a level that they think they can sell,” Mr Tan said.

“Projects that are priced to sell can still sell, so fundamentally the market still has liquidity and people are still positive about Singapore as an investment destination in the longer term. I think it’s right that the government doesn’t withdraw the cooling measures too soon,” he added.

National University of Singapore’s Associate Professor Sing Tien Foo said the move to reduce supply could prevent a price war where developers slash prices to compete for buyers. This is unhealthy as developers may compromise on other areas, such as construction quality, to make up margins, he said.

Cut in supply of BTO flats will ward off glut
By Janice Heng, The Straits Times, 22 Oct 2014

PROSPECTIVE buyers of new Housing Board flats may be alarmed by the news that there will be a 25 per cent cut in the number of flats launched next year.

But there is, arguably, little cause for worry.

This is not a case of regular supply being choked off but, instead, a return to sustainable levels after three years of unusually high supply.

The move helps to avoid the damaging prospect of a supply glut - a problem that may seem alien to first-time buyers today but was a pressing issue just over a decade ago.

When announcing the move on Monday night, National Development Minister Khaw Boon Wan was careful to put it in context. From 2011 to last year, more than 25,000 Build-To-Order (BTO) flats were launched each year to meet "pent-up demand", he said.

This backlog has largely been dealt with, which is why the HDB is returning to a slower pace, cutting supply by 10 per cent this year, and another 25 per cent next year.

There are signs that demand for BTO flats is falling. For one thing, application rates have been dropping, so it makes sense to cut BTO numbers now. "The chances of first-timers securing their flats are quite high," said ERA Realty key executive officer Eugene Lim.

This year, there have generally been two or fewer first-timers chasing each three-room or larger flat available to them.

Application rates for flats in certain projects have been as low as 0.4 first-timers per flat.

"With a reduced supply, we may expect the application rates to increase but not significantly," added Mr Lim.

After all, the three years of higher flat supply were the aberration. This cut is part of a gradual return to the norm.

The 16,000 or so new flats next year will also exceed the estimated 15,000 new Singaporean families formed annually.

And if some first-timers turn to the resale market as a result, that is not necessarily a bad thing.

First-timers formed almost a quarter of resale buyers in 2011 but this fell as most people opted for BTO units instead. For many sellers reportedly having trouble finding buyers, the return of first-timer demand will be a boon.

In the longer term, there is a more important need for the supply cut, and that is, avoiding an oversupply down the road.

This was alluded to when Mr Khaw framed the 16,000 figure as "sufficient to meet demand, without causing a glut in the public housing market".

Policymakers are likely still haunted by the spectre of empty HDB blocks in estates such as Sengkang, as was the case in the late 1990s and early 2000s after the Asian financial crisis.

"A supply glut will have a severe impact on the one million HDB flat owners in Singapore," said PropNex Realty chief executive Mohamed Ismail Gafoor.

In other words, it is better to face a bit more competition for a new flat now, than to find your flat's value eroded a few years down the road.

Striking a precious housing balance
The Straits Times, 28 Oct 2014

FEWER applicants for new flats and five consecutive quarters of resale price falls have seen the Housing Board market going off the boil. The operative word is "going", denoting an incomplete market correction. National Development Minister Khaw Boon Wan's view that control measures for the sector as a whole should remain is the clearest word yet that real estate retains a capacity to cause an unwelcome wobble in the economy. Relative to the cumulative price run-up in the boom years, the considered judgment is that such cooling as has occurred has some way to go.

A planned 25 per cent reduction in the supply of build-to-order HDB flats next year, on top of a smaller trim this year, is a measured response in the sense that most people who currently need a flat have got one, although prices are only slowly coming off their peak. Young married couples and families wanting to live close together will continue to enjoy preference. This is pitching close to the golden mean.

But mindful of the last bout of frothiness, when cash over valuation became a burden to buyers, one could not be certain that the supply contraction will produce the desired price stability within a reasonable period. (In new and resale private housing, industry expectations of 10-15 per cent falls to more sensible price levels have not eventuated.)

Things are never that simple in real estate, especially in public housing planning. The HDB works to a gestation of four to five years, beginning with the number crunching of existing stock, marriage rates, foreigners granted residency and, yes, even emigration outflow to an extent. Anything could happen in the interim to necessitate a review.

Preserving a balance between holding fair value for existing owners and keeping prices reasonable enough for intending buyers and upgraders is part logic, part intuition. Singapore has seen extremes, sometimes unavoidably.

In the booming 1990s, HDB applicants had to contend with long queues despite strong supply. Finicky buyers undecided about location and flat-type waited for up to seven years. The Asian currency crisis that struck shortly after caused the market to seize up, leaving what became a dead stock of 30,000 flats. It took years to clear the surplus.

Disruptions can occur at any time. Unease about the current global growth slowdown is a reminder that asset volatility can be managed up to a point only. Imponderables include terrorist strikes and spikes in interest rates.

The HDB maintains a small buffer stock to act as a stabiliser, but even this is subject to variables. Hence, it would be a tall order to expect planners to always strike a perfect balance between supply and demand, and between affordability and eroding asset values.