What is the Government Land Sales (GLS) programme? 

It is a process whereby the Singapore Government releases state land sites for developers to bid for in an open tender so they can use it to develop properties for residential and commercial use. Land sites are released through two lists – the Confirmed List and Reserved List. 

Sites released under the Confirmed List are sold to the highest bidders while sites under the Reserved List will only be open for tender or sale if an interested developer submits a successful application indicating a minimum price that is accepted by the Government.

How many Confirmed List sites will be available in 1H2021?

A total of four residential sites have been placed on the Confirmed List and will be up for tender in the first half of 2021, with one of the sites being allocated for an executive condominium (EC). These sites will yield approximately 1,605 residential units – an increase from 1,370 units in the previous 2H2020. There are no new sites being released predominantly for commercial or hotel use this time round.

What are some insights from 1H2021 GLS and how will the property market be impacted in the next few years? 

Although there is only a moderate increase in sites for 1H2021 due to the Government’s cautious approach towards uncertain market conditions, this does indicate their confidence in improving economic conditions. This increase is a good initial sign to mitigate a future growth in demand. Looking at 2020’s data, we can see that the number of unsold residential units (unsold inventory) has decreased throughout 2020, indicating that the pandemic has not slowed down demand. If the economy bounces back and the sales momentum follows 2019’s trajectory and continues in 1Q2021, the number of unsold inventory at the end of 2021 might drop below 20,000 units. 

Land supply has also been on a downward trend, which has stoked fears of increasing property prices.

It is important to note that this will not lead to an immediate increase in property prices in Singapore. The increase in property prices due to the scarcity of land supply will likely only take effect in about five years’ time. 

Rather, the increased cost of construction fees may potentially be a factor causing the increment of property prices in the short-term. However, with the limited land being released and as a result, lesser amount of properties being developed, demand of construction services is reduced, which may help mitigate an increase in property prices. Coupled with the recent restrictions on reissuing of Options to Purchase (OTP) which makes it tougher for HDB flat upgraders to purchase new launch properties, the demand for these properties will decrease, and with that, prices will level out as well.

How will the OTP reissue affect the property resale market?

With the suppressed demand for new properties, upgraders may pivot to resale properties instead. 

Why is this a good thing?

If the market becomes saturated with new property launches, this will cause the resale market to lose its attractiveness. This in turn will create a property bubble due to the disparity in pricing for new property versus a resale property. 

There will likely be more measures implemented by the Government in the years to come to encourage and attract more existing homeowners looking for an upgrade into purchasing resale properties. When the demand for the resale market catches up to the new launch and sales market, this will then prevent a property bubble and also help to strengthen and stabilise the Singapore property market. 

With that said, there is still demand for products in the new launch market, more so by investors than upgraders. Recently, new property launches have sold out their cheapest entry level units (some examples are Clavon and PENROSE selling out their 1 bedders upon launch) which indicates a bigger demand for properties being purchased for investment purposes.

Conclusion

We should not worry too much about a property price increase in the near future and rush to buy a new property right now when we are not ready. The price increase will likely happen in 5 years time. Even so, the government’s goal is to ensure the property market is stable and there is sufficient for every aspiring property owner. In their media release with regards to the recent GLS, The Urban Redevelopment Authority stated that: “The private housing supply in the 1H2021 GLS Programme, together with the supply of units already in the pipeline, will sufficiently cater to the housing needs of the population when completed in about four to five years’ time. The supply on the Reserve List also gives developers a good selection of sites to initiate for development.”

The resale market also provides ample opportunities for those looking to upgrade. 

Hence, we should always do our own research and make sure we are financially ready to enter into a property purchase within our affordability and fulfills our needs and financial goals.