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.
"It could be status quo, in line with the H2 2012 Programme with supply of around 7,000 units each for the confirmed and reserve lists, or a step-up to 8,000 units in the confirmed list and 6,000-7,000 units on the reserve list."
Justifications for stepping up land sales would include strong developer sales in 2012 and the need to send a signal to buyers that supply is being increased to meet demand.
In the first 10 months of 2012, developers sold 19,792 private homes excluding ECs - busting the full-year 2011 figure of 15,904 units as well as 2010's record of 16,292 units.
Mr Ong also points to a recent strengthening in land prices and participation at state tenders.
Last week, an EC site near Pasir Ris Beach fetched a top bid of $331 per square foot per plot ratio (psf ppr), 14 per cent higher than a neighbouring plot sold in October last year.
Last month, a condo plot in Tanah Merah sold for $791 psf ppr - 17 per cent more than a nearby site in August.
The increase in land demand has resulted in developers triggering five residential sites from the H2 2012 reserve list, which can yield 1,500-1,600 units.
That said, Mr Ong believes there is a fair chance that the authorities will stick to the current supply quantum.
"The curbs on housing loan tenures were imposed only recently in early October and seem to have an impact on demand as seen in the fall in developer sales in that month," he said.
He also cites the substantial supply pipeline and concerns over Singapore's economy next year.
DTZ's Asia Pacific research head, Chua Chor Hoon, predicts that MND will continue to roll out a high stock of residential sites in the confirmed list to supply 7,000-8,000 private homes, including ECs, "as the bidding for sites and take-up of new launches have been very strong in H2 2012 and show no signs of abating".
"The main consideration will be to have a spread of sites - in different regions islandwide, and some close to and others far away from MRT stations - to provide a greater variety of homes to suit different budgets and location preferences of buyers."
As for sites for commercial (ie, office and retail) use, Ms Chua believes MND is likely to continue releasing one or two plots in the confirmed list to achieve its planning objective of building up certain areas, such as Jurong East regional centre.
"The majority of sites will be in the reserve list as there is less imperative to push out supply - unlike residential."
Analysts note the strong demand for hotel land as seen in last week's tender for a plot near Jurong East MRT Station, which drew 11 bids and a record top bid of $1,167.35 psf ppr.
In H2 this year, three sites for hotel use or with a minimum hotel component have been triggered from the reserve list - in Jurong, Victoria Street and Novena.
Said CBRE Hotels executive director Robert McIntosh: "In addition to demand for hotel sites in the suburbs where there is insufficient supply, there is still strong demand for hotel land in the city centre. International hotel buyers are very selective and like locations such as Raffles Place, Marina Bay, Orchard Road and Singapore River."