Does more GLS = Lower prices of new projects?

By The Folks @PropTalk - June 9, 2011 No Comments

You probably know the answer already, but here are statistics from DTZ to substantiate that "NO".

According to a study by DTZ, the median prices of new 99-year leasehold condos launched in 2010 and 2011 on sites sold at Government Land Sale (GLS) tenders have generally been 8 - 35% higher than those of comparable nearby condo released earlier.

Analysts note that since last year, the government has been releasing more 99-year condo sites near projects that have sold like hot cakes in a bid to cool the market. However, strong demand for new projects from owner occupiers as well as investors keen on a hedge against inflation has been depleting land banks of developers, leading them to bid competitively for land at state tenders. This has translated to higher prices when they launch new projects.

Credo Real Estate executive director Ong Teck Hui says: "For a family that has been aspiring for years to upgrade to private property, the conditions seem favorable: the job market and the economy are good, interest rates are low. It's difficult for policymakers to discourage people from buying property under these circumstances."

Ms Ong also suggests: "Releasing more land now to try and slow down end-unit take-up doesn't work, because when people are in a buying mood, numbers on future supply aren't going to deter them."

However, Analysts have warned about a potential glut when all the units being sold at property launches are completed - if there are no occupiers for a large number of these units, and the completions coincide with an economic downturn. A slowdown in the rate of immigration will also affect demand.
Source: The Business Times

Surely the potential glut that analysts warned about won't happen, you say? Well, try telling THAT to the folks who paid record prices for properties just prior to the global financial meltdown in 2009.

And at the end of the day, developers can only continue to "slap" you with higher and higher prices if you choose to be "slapped". Trouble is, there seems to be quite alot of masochists out there still...


No Comment to " Does more GLS = Lower prices of new projects? "