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Oct 2, 2007

Govt to boost supply of homes

Observers view supply increase as a signal to calm market amid high property prices

By Fiona Chan, Property Reporter

THE Government has sent its strongest signal yet that it plans to increase the supply of homes and residential sites - a move that comes amid soaring real estate prices.

It will offer 6,000 new Housing Board flats over the next six months and might release more land for private homes next year if necessary.

The initiative comes as lower-end homes see a price spurt that is finally starting to match that in luxury homes.

Property consultants said the increased supply is the latest Government move to calm the market.

'The Government is seeing a very strong take-up for homes, and it wants to avoid panic buying,' said Mr Nicholas Mak, the director of research and consultancy at Knight Frank. 'So it's just telling potential buyers there is a lot of supply out there.'

Prices of entry-level private homes in suburban areas were 8.1 per cent higher in July to September than in the previous three months. The pace about matched that set by more expensive homes in the central region, going by initial estimates out yesterday.

In the same period, prices of HDB resale flats jumped by 6.5 per cent. This is double the 3 per cent rise in the previous quarter and is by far the biggest quarterly jump since 1999.

Given the recent 'good response for new flats', HDB will release a slew of new units in the coming months. Of these, 4,500 will come under the Build-to-Order (BTO) system. Another 1,500 units will be in three new Design, Build and Sell Scheme (DBSS) sites in central and eastern Singapore.

So far this year, HDB has released 2,700 BTO flats - about the same number as for the whole of last year. In the same period, it has sold a DBSS site at Boon Keng and launched another at Ang Mo Kio. The two combined can host at least 1,100 units.

HDB also said it 'will continue to monitor the market situation closely, to ensure that there is an adequate and affordable supply of flats'.

A similar reassurance was issued by the Urban Redevelopment Authority (URA) with respect to private homes. It reiterated that it 'will continue to monitor prices closely'.

In an unusual move, the agency added that it is reviewing the Government Land Sales scheme, launched every six months, for the first half of next year. It said it 'will make available more sites...if the demand continues to remain strong'.

Experts interpreted this to mean that the URA intends to put out more sites for private home development, especially under its confirmed list.

The confirmed list system offers sites for sale outright, while the other option - the reserve list - follows a more cautious approach. Reserve sites are put out only when a developer submits a minimum acceptable bid.

While consultants believe the new HDB flats can be absorbed easily, some question the need for more land for private homes.

'I don't think there would be a glut on the HDB side,' said Knight Frank's Mr Mak. 'If there is any risk of oversupply, it would be with private homes, three to four years from now.'

He noted the record run in collective sales in the past two years. Even if developers can sell all the new homes on these sites, those buying to rent out might not be able to find enough tenants when all the homes are finished.

This could bring rents and prices down, said Mr Mak. But for this year, he expects a record take-up of 15,000 new homes, compared with 11,000 last year and 7,500 in an average year.

On the other hand, collective sales will remove about 9,000 homes from the market, said Mr Ku Swee Yong, the director of marketing and business development at Savills Singapore.

'If job growth continues to be strong, absorption may not be the problem; actually, there may not be enough to go around,' he said.

The URA also removed a hotel site in Balestier from its land sales list yesterday. The 0.86ha site has been on the reserve list for a year or so, but the URA is reviewing its land use together with that of other vacant plots nearby.

fiochan@sph.com.sg