(Bloomberg) -- Surging bids for Singapore land aren't sustainable in a market constrained by demographics and the government's cooling measures, according to the head of a developers' association.
“It is not sustainable to continue at this rate,” Augustine Tan, president of the Real Estate Developers' Association of Singapore, said in a speech on Wednesday. “With property measures in place, slow growth in Singapore's population and manpower curbs, we do not see a runaway demand in sales transaction volume and property prices in the next few years.”
His comments strike a note of caution as land auctions and redevelopment deals set records, and after home prices rose for the first time in four years in the three months through September, snapping a record run of declines. City Developments Ltd., Singapore's second-largest listed developer, and a partner on Wednesday won a S$907 million ($667 million) bid for a residential redevelopment project, a record price for a freehold deal of that type.
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Tan's comments contrast with Singapore developer Oxley Holdings Ltd. saying on Tuesday that it has turned “very bullish” and sees home prices elevated by developers who pay high prices for land. According to Tan, buyers are still price-sensitive and he argues that many may downgrade to public housing because of weak economic and job growth or, in some cases, after selling their apartments for redevelopments.
In other comments, Tan said:
- If the prevailing “bullish” appetite for residential land persists and demand is not sustained, that will feed into a mix of increased supply, high vacancy rates and rising interest rates
- Rents are falling and new completions are adding to inventory just when multinationals are down-sizing or cautious about hiring. Vacancies of private homes are at 8.1 percent.
- Of a supply of 35,400 uncompleted private residential units, 43 percent remained unsold as of June 30.
- Seventeen redevelopment deals were signed this year and a potential eight such deals are in the pipeline, possibly yielding 13,000 homes over two years.
A jump in home sales is stoking optimism in the property market. At the same time, the bulk of Singapore's cooling measures rolled out from 2009 are still in place. Before the latest data, a 15-quarter decline in prices was the longest since the index was first published in 1975.
To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net.
To contact the editors responsible for this story: Sree Vidya Bhaktavatsalam at sbhaktavatsa@bloomberg.net, Paul Panckhurst
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