URA TENDERS FOR PRIVATE LANDED HOUSING

Mr Chia Shi Teck asked the Minister for National Development what are the reasons for a single developer to succeed in out-tendering almost all other tenderers in the first two Urban Redevelopment Authority small parcel tenders for private landed housing.

Mr Chia Shi Teck (Nominated Member): Mr Deputy Speaker, before I ask the Question, may I declare my interest as a director of a property company and also I have nothing against any developer. Question No. 5, Sir.

Mr Lim Hng Kiang (for the Minister for National Development): The Government put up landed properties in small plots for sale to allow smaller companies and individuals to participate in the tenders.

The criterion for the award was made clear in the tenders, namely, the highest bid wins. Companies linked to the Far East Group succeeded in out tendering the others because they put in the highest bids for the majority of the plots on tender.

Mr Chia Shi Teck: Sir, if the very objective, as the Minister said, is to encourage individuals to bid and if such a big developer has tendered all the plots, should such a scheme be scrapped in view of the fact that property prices have been pushed up because of these high tender prices?

Mr Lim Hng Kiang: I am not sure how the Member has come to the conclusion that property prices have been pushed up by the bids. The purpose of demarcating it into small lots is to open the field for everybody to compete, whether he is a big developer, small developer, or an individual. We think it is a good scheme which allows more opportunities for small developers and individuals to bid. If we do not have such a scheme, they would have been out of the market completely. We will still continue to try out with this scheme and make these opportunities open for small developers and individuals.

Mr Chia Shi Teck: Sir, will the Minister agree that if I have, on hand, 10,000 units of landed property plots, I would tender up my existing stocks and whether I make or lose at the subsequent 100 plots that I tender is immaterial, as my existing 10,000 plots would have risen in value?

Mr Lim Hng Kiang: This is the perception of people. Whether it is true in a marketplace that by tendering for 100 plots, you are able to lever the price of all your existing 10,000 plots and influence the entire property market would suggest a very unsophisticated market, ie, bankers would just look at the evidence of 100 units and jack up the loan requirements of all 10,000 units of the developer, or of the entire property market, or of buyers who would be seduced by the fact that 100 units have been jacked up and they now go in willing to pay higher prices for the 10,000 units on offer. I think, ultimately, the market price is determined by willing buyer and willing seller. As long as the buyer has all the information available to him, knowing the supply of new properties coming on to the market, and if he is prepared to pay the price, then that would be the market price.

Mr Chia Shi Teck: Sir, will the Minister agree that as Singapore has limited land supply, the market is not perfect? Therefore, the availability in the market is actually not that simple, and that market can be cornered.

Mr Lim Hng Kiang: If the market is so easily cornered, there will be many, many developers out there trying to corner the market. Take the reverse situation. In the depths of a recession, why did you not tender for 100 units and push up the price of all the 10,000 units they were trying to sell during the 1985/1986 recession? Does it work?

Mr Chia Shi Teck: Sir, the very same developer has done it in the commercial property where, during a recession, he can just abandon the successful tender and lose his deposit. He abandons the projects because, here, you are not talking about an immediate supply. Houses take some years to develop and the developers can just walk out on the successful tenders whilst benefitting from the existing stocks that are already up in the market for sale.

Mr Lim Hng Kiang: Since the 1985 recession, the Government has changed the ground rules for sale of sites. All tenderers pay up the full price of their land which they tender upfront and it is no longer a deposit. If the market turns bad, they give up the deposit, and lose the deposit. They pay up the entire cost of the land upfront. There is a time limit for the construction. If they cannot or refuse to complete within that time frame, they are charged liquidated damages for every period of time that they do not conform. So unless you are saying that this big developer is only in for these 10,000 or 100,000 units and he does not want to continue business in Singapore, then that might be what he would do. But he has to pay the land price which is 30% or 40% of the total development cost upfront and he will be charged liquidated damages if he does not complete the project on time. The conditions have changed since 1985.

Mr Chia Shi Teck: Sir, under such circumstances, if the Minister were to continue with this tender of small plots, would he attempt to advise the individual tenderers on how to be successful in the bid, otherwise their dream will never be realised?

Mr Lim Hng Kiang: People who are tendering for these small plots, whether they are small developers or individuals, I think, are sophisticated individuals who know what is the market price for the land. These are not small investments. They want a piece of property, whether it is landed, or in combination with their friend's, family's, or their company's semi-detached development, and they want it in the design of their own choice. They know that they are competing with big developers as well as other small developers and individuals. So they must assess the market and bid correctly. I am in no position to advise them how to bid. We, in the Government, must provide the information openly and freely so that everybody makes his decision based on the open availability of all information. That is the best way to keep the playing field level by making sure that everybody has equal access to the information.