Whether the volume and values of land deals this year is a boon or a bane is up for debate. While some may be excited about the immediate prospects of new launches, others may be thinking further into the future.
Record land deals sealed this year – a boon or a bane?
The sheer amount of land sold this year means the volume of private homes will double in 1 to 2 years’ time. Most of the units will come from the redevelopment of projects sold en bloc and the Government Land Sales (GLS) programme.
National Development Minister Lawrence Wong has urged buyers to be aware of what they are buying and buying into. With immigration rules still strict, housing supply will be soon be sufficient to meet demand. When that happens, there might be fewer rental opportunities. He also cautioned developers on over-aggressive land bids and warned against sub-quality workmanship with hints at possible action against those who compromise.
Authority restrictions may put strain on developers
The current vacancy rate remains above 8%, the highest since 2005. Although the inventory of unsold stock has diminished in the past few quarters, there are still 30,000 vacant units in the market.
There are regulations for developers to complete the sale of a project within 5 years of the land being awarded. The tight timeline could tempt some developers into comprising on quality. Mr Wong has asked the Urban Redevelopment Authority (URA) and Building and Construction Authority (BCA) to step up on their checks on errant developers. Developers who consistently fail checks may be subjected to restrictions. They may need to obtain a Quality Mark certification for their projects or be disallowed to launch units for sale. This is a timely reminder to buyers and investors to do their own due diligence on developers’ track record before signing on the dotted line.