S'pore property developers face govt cutback measures

S'pore property developers face govt cutback measures

SINGAPORE (Reuter): Singapore property developers, faced with an oversupply of housing, have been given a slight reprieve by the government's move to cut back its land sales program, developers and property analysts yesterday.

The government said on Wednesday it would supply land for 5,000 private homes in 1998, down from 7,000 this year.

Minister for National Development Lim Hng Kiang said the figure was in line with the government's medium-term target of releasing land for an average of 6,000 private homes a year.

Analysts and developers said the cut back in 1998 provides a much needed boost to the mood in the property market, but would do little to address the oversupply in the medium term.

"It is better than expected. Developers are sitting on top of the world," said Ong Choon Fah, a director of real estate consultant Edmund Tie & Co.

"It is a real relief to developers. The immediate impact is more psychological than real, but the cuts should stem some of the 'dead sentiment' in the market," said a director with a major listed developer, who declined to be named.

Analysts said the cutbacks in the land sales program probably had more to do with the government's concern with the regional financial turmoil rather than aggressive lobbying by developers faced with an growing mountain of unsold new homes.

"The regional financial turmoil is having a real impact on sentiment. People are less willing to invest, whether it be property or shares, so the demand is just not there," said one developer.

The government estimated that annual demand for private homes from middle-income families is about 10,000-12,000 units a year. But analysts said the take up rate for this year would be closer to 6,000.

Ong said it was a "safer route" for the government to scale back its land sales program because of the uncertainties created by the regional plunge in stocks and currencies.

But the fact remains that developers still have a huge stockpile of new homes.

Ong estimated that 21,000 new homes could become available between the second half of 1997 and the end of 1998. This was on top of the 15,000 unsold homes at the end of June, according to data from the Urban Redevelopment Authority.

Lim Chung Chun, an investment analyst with ING-Baring Securities, said there would be no change in the supply situation in the near term and the cutbacks would only be felt in late 1999 at the earliest.

"The cuts will not address the demand/supply imbalance in the short to medium term. Sentiment would be boosted, but probably not enough to cause a recovery in the physical market," he said.

Ong said she did not expect "fire sales" from developers to clear their stock, but they would continue to give indirect discounts, like free renovations, to move the market.

She said of the 6,800 new homes launched in 1997, about 80 percent was supplied by five large developers.

"They are experienced and have considerable holding power. They will have to make adjustments to move the market, but it will be in a measured way."