The oversupply of residential units is affecting values but, with rising costs of development, prices cannot drop too deeply without affecting product quality, argued the president of the Real Estate Developers’ Association of Singapore (Redas).
Apart from price pressures, about 3,000 units from developments built on sites from the Government Land Sales Programme in 2012 remain unsold.
Mr Tan said: “The total number of unsold units is about 40 per cent of the 7,500 units that developers are expected to sell this year.”
Developers are concerned about a five-year timeframe to sell all the units in a project to avoid paying the additional buyer’s stamp duty.
Mr Augustine Tan, who was speaking at the association’s 56th anniversary dinner at Marina Bay Sands last night, told the audience that developers remain concerned over the widening supply-demand imbalance. He noted that a recent survey of 14 projects showed that there had been price cuts of up to 11 per cent for some apartments, with a number of projects having to implement two reductions since 2013
He also noted that development costs had increased. The cost of construction has risen as a result of improved quality and higher specifications for apartment finishes and fittings. There are also higher costs of operations – for example, regulatory fees for plans submission and other sustainability initiatives.
Mr Tan said: “Prices cannot drop too deeply without affecting the quality of our products and operational obligations.”
Finance Minister Heng Swee Keat, who was the guest of honour at the dinner, talked about how Singapore, being land-constrained, has focused on sustainable development, in both an environmental as well as an economic sense.
On the economic front, the property industry, home owners and the Government have a shared interest in ensuring a stable and sustainable property market, added Mr Heng.
He noted that the US subprime debacle and the global financial crisis in 2008 are reminders of the perils of credit and property bubbles and the risks of asset markets becoming decoupled from an economy’s underlying fundamentals. In Singapore, he noted that while there have been swings in the property market from time to time, by and large these have not led to volatility in the broader economy.
Mr Heng said the Government “has always taken a medium-term approach towards managing land supply, based on fundamental demographic and economic factors, and has encouraged a competitive and transparent environment to ensure a well-functioning property market”.
He added that the Government has used various measures “to smooth out the cycles and promote market sustainability over the medium term”.