SUPER LUXURY RESIDENTIAL PROJECTS

SUPER LUXURY RESIDENTIAL PROJECTS:

(Measures to prevent excessive speculation): 7.

Mr Alvin Yeo asked the Minister for National Development, in the light of the steep run up in prices for super luxury residential projects, whether there is a speculative "bubble" forming in that sector and whether any measures will be taken to prevent excessive speculation.

Mr Mah Bow Tan: Mr Speaker, Sir, let me first provide the Member with some statistics on the level of activity in the property market. Could the Clerk please distribute the tables to the House? [ Copies of Tables distributed to hon. Members. ] Sir, if Members would refer to these tables which are being distributed now, they can see that prices of private residential properties overall rose by 10.2% in 2006, compared to 3.9% in 2005. This is in Table 1. While the prices of non-landed private residential properties rose by 11.1% in 2006 as a whole, prices of these properties in the Core Central Region (CCR) increased faster, by about 17% in 2006, compared to 3% in Rest of Central Region (RCR) and 4.2% Outside Central Region (OCR). This is given in Table 2 as well as in chart form in Chart 1. For the fourth quarter of 2006, there were 426 sub-sales of private properties island-wide. Sub-sale, by definition, is the sale of a unit by someone who has already signed an agreement to purchase a unit from the developer or somebody who subsequently purchases a unit and resells it before the completion of the property, ie, before the issuance of the CIS (Certificate of Statutory Completion). So these sub-sales in fourth quarter 2006 represented about 5.4% of the total number of private housing transactions in the quarter. If I break it down further, in the Core Central Region (CCR), this is where the higher-priced residential projects are located, sub-sales accounted for 9.7% of all private housing transactions, again for 4Q2006, compared to 3.5% in Rest of Central Region (RCR) and 2.3% in Outside Central Region (OCR). If you look at Chart 2 and Table 3, these figures are below the proportion of sub-sales in 1996, which reached a high of 28% of all private housing transactions. So the current situation, even for the Core Central Region, it is less than 10%.

Sir, based on these statistics, it is evident that prices and take-up of private housing are rising sharply but only in the Core Central Region. In other parts of Singapore, the increase is steady and is supported by economic fundamentals. The Government will continue to monitor the private property market closely and ensure that there is sufficient supply of private housing to meet demand through the Government Land Sales Programme.

To provide the public and the industry with more information, I have asked URA to break down the property market data into regions, for new as well as sub-sales and for completed as well as uncompleted projects, because the price movements in each of these sub-categories are quite markedly different. With the release of more data, I hope members of the public will be able to assess the market on their own, and make informed and prudent decisions. I would like to remind the public that buying a property is a major commitment, which they should make only after careful consideration of their financial situation and affordability of the property, and after a careful assessment of the market.

Mr Alvin Yeo (Hong Kah): I would like to ask the Minister whether he has any comment on recent newspaper reports that say that prices in the super luxury market have moved up by more than 25% in less than a year and that there has been multiple flipping of options in some of these high-end projects. A second supplementary question: Given that the super luxury segment is extremely visible to international investors, would he agree that a forming of a "bubble" in that segment and the bursting of that "bubble" could damage international investors' sentiments, and have a knock-on effect on the Singapore property market?

Mr Mah Bow Tan: As far as the first question is concerned, as shown by the statistics that have been distributed to the House, I think the reports in the press are somewhat exaggerated. Even in the Core Central Region, which is the area where the so-called super luxury developments are located, the increase for last year was 17% (quarter on quarter). So it is not as high as the newspaper reports seemed to suggest. Having said that, of course, there is a big difference between the increase in the Core Central Region and the rest of Singapore, and this is again amply demonstrated by the statistics that have been distributed. There is also a lot of what the Member calls "flipping". The number of sub-sales is close to 10% whereas it is about 2% or 3% in the other areas. So, yes, there is a difference in the level of activity in the property market in this section as opposed to the rest of Singapore.

Why is that so? I think it is quite clear that, first of all, the supply and demand pattern is quite different in this area as opposed to the rest. For a start, the interest in properties in this segment of the market is very much higher among the international or overseas buyers, although I must say that the purchases by overseas buyers is not very different from what it was in the last few years. That is one of the reasons why the prices in this area have moved up much faster than the rest. Yes, it is a very visible sector of the market. It is an area which attracts international attention. But precisely because it attracts international attention, the prices here are moving.

Is a property "bubble" forming? If you look at the number of sub-sales, I would say there is really no cause for concern at the moment. But the Government is monitoring the situation and making sure that the property market stays healthy.

I have indicated in my answer that the purchase of a property by anybody, whether it is for owner occupation, whether it is for speculation or whether it is for what people call "specu-investment", I think all those decisions must be taken very seriously and very carefully. And that is the reason why I have asked for more information to be released so that people can really make proper prudent decisions for themselves and not just rely on newspaper reports or on what people with vested interest in this market tell them.

Mr Zaqy Mohamad (Hong Kah): What is the knock-on effect from this property rise in the private sector on the public housing sector? Secondly, we have seen an increase in the numbers of potential home owners going for walk-in selections, what measures have we got in place to prevent another bubble in the public housing sector as well?

Mr Mah Bow Tan: The statistics for the public housing sector suggest that the rise in HDB flat prices has been steady but not as sharp as in the private housing market. For example, last year, the increase was about 2%. So, there is no cause for concern as far as the public housing sector is concerned. Indeed, there is sufficient supply of housing in the public sector. There are still flats that are available for sale and anybody who wishes to buy a flat and is not choosy about where that flat needs to be or the flat type can actually walk in to HDB tomorrow and get a flat. And that is the reason why HDB conducted this walk-in selection exercise (or WIS).

Yes, there was a little bit of a frenzy last month when rumours went around that there were flats for sale in the mature market. As Members would know, flats in the mature market are always in demand. What HDB did not communicate adequately was the fact that these flats in the mature market are actually not so popular flats because they had been offered for sale before and they were not taken up. That is why HDB felt that a walk-in selection exercise would be proper for this particular sale. I think they underestimated the power of the rumour mill and as a result of that, many people queued up in anticipation that these flats were what they wanted. They will learn lessons from this particular episode. They are now reviewing the sale exercise. Instead of doing it by walk-in selection, perhaps, if it is seen to be popular, they should be doing it by other means, like a balloting exercise.

But let me assure the House that there are sufficient flats available in the market today and there will continue to be flats available for new home owners. These flats may not be new flats per se or they may not be new flats in the areas that they want, but there will be flats available, both new as well as resale flats. And the Government will continue to make sure that this is so.

Ms Jessica Tan Soon Neo (East Coast): What is the knock-on effect with regard to commercial property? Recently, there were reports that rental prices year-on-year have increased double digit in the high end. I cannot remember the target now. If that is the case, how is it affecting our competitiveness, especially in the central area, for companies like financial institutions, whom we are trying to attract to Singapore? How is this affecting our cost competitiveness and what is being done to help the situation?

Mr Mah Bow Tan: Yes, I think the Member is correct in noting that the price increase in the commercial property market is actually much higher than in the residential market. This is as a result of a very short-term imbalance between the demand for such spaces and the supply. Unfortunately, during the times when the economy was not doing well, developers did not take up the land that was offered for sale for commercial properties. They actually left it to a time when the market started to pick up. But as the Member would be aware, there is a gestation period, a certain lead time, before such spaces can be prepared. For example, the BFC was triggered for sale a couple of years ago. It started construction, but it will not be ready till 2009/2010. In the meantime, between now and then, there will be a short-term imbalance, a short-term shortage, and this is the reason why prices are moving up.

What the Government is doing is, first of all, to make sure that over the longer term, there will be sufficient supply of space for offices and for people who want to come to Singapore to set up business. That is the reason why in the recent Government land sales programme, a site has already been earmarked for use as office space and it will be sold on the confirmed list. In other words, it will be sold whether the developers put a reserve price on it or not. But this would only come onstream 2010 and beyond.

What do we do between now and then? First of all, the Government has moved to make available spaces for temporary occupation. Some of the Government buildings that have been vacated, for example, Pearl's Hill, some of the schools, etc, have been made available by the Singapore Land Authority for use as commercial and office space. They may not be suitable for all establishments or all companies, like banks, for example. Some banks may not want to, but there are others who will find such spaces suitable and, hopefully, they will take up these spaces.

So, in terms of overall quantum, yes, there is an imbalance and there is a shortage at the moment. But I see and expect this shortage will be resolved within three years at the outset and after that, a more balanced situation will prevail. Between now and then, we will try to put up more spaces for the commercial and office sectors in existing Government premises.