IT is in the interest of all stakeholders to have a stable and sustainable property market in Singapore, Minister for Finance Heng Swee Keat told industry players at the Real Estate Developers' Association of Singapore (Redas) anniversary dinner at Marina Bay Sands on Thursday night.
"The industry, homeowners and the government have a shared interest in ensuring a stable and sustainable property market. Indeed, the US subprime debacle and the ensuing Global Financial Crisis in 2007-08 have reminded us starkly of the perils of credit and property bubbles, and the risks of asset markets becoming de-coupled from the economy's underlying fundamentals," Mr Heng reminded the audience.
"The consequences have been severe in the US, as a housing market collapse quickly cascaded to the financial system and led to a recession, not just in the US, but in the rest of the global economy."
These remarks come even as property players continue to chafe at the impact of government cooling measures on recent years. They highlight a host of issues that face developers here - from an oversupply of residential units to a ballooning unsold inventory and rising costs of construction and operations.
Thus, prices "cannot drop too deeply without affecting the quality of our products and operational obligations", Redas president Augustine Tan said at the event.
"Having made significant progress in the standard of our built environment, it is no longer possible to look back. We have to progress."
Citing a recent Redas survey of its members covering 14 non-landed projects launched from 2013 to 2015, he highlighted that respondents reported price reductions of up to 11 per cent with some projects having had two price cuts since 2013.
The clock is now ticking for the 3,000 units in projects from the Government Land Sales Programme of 2012 that have remained unsold to-date.
"Developers will have to sell out 100 per cent of the units in these projects by 2017 in order to qualify for the remission of the Additional Buyer's Stamp Duty (ABSD) on the land cost," said Mr Tan, who is also executive director, property sales and corporate affairs, at Far East Organization.
Since late 2011, developers here have had to develop any residential site they buy, and sell all the units in the new project within five years, or pay the ABSD of 10 per cent. Sites bought from Jan 12, 2013 onwards will incur a higher 15 per cent rate.
The Ministry of Finance had last month said that it did not see the need to relax this condition as "the deadlines remain relevant and reasonable".
The Finance Minister told the gathering that Singapore had experienced swings in the property market from time to time but these have not led to volatility in the broader economy because of its prudent approach.
"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," Mr Heng said.
"When necessary, we have judiciously used targeted prudential and fiscal measures to smooth out the cycles and promote market sustainability over the medium term."
In response to concerns over a potential oversupply of completed residential units, the government had moderated the pace of land sales for residential development. But this led to land prices staying elevated as a result and did not make it less costly for developers to replenish their land bank.
Frasers Centrepoint CEO Lim Ee Seng noted that there are developers that have run out of landbank and may be bidding for sites even at breakeven level. "They have to maintain their staff team, otherwise if the market turns, how are they going to re-assemble the team? The greatest difficulty now is to recruit and train talent."
Apart from land cost, construction costs have also gone up over the years. Mr Tan of Redas also flagged rising costs of operation for developers stemming from high regulatory fees for plans submission, requirements for Green Mark certification and other sustainability initiatives, as well as costs related to restrictions on foreign labour and site operation hours.
UOL deputy group CEO Liam Wee Sin noted that apart from the continued high land cost due to the lower land supply and stubborn construction costs, developers' project efficiency has also come down as they offer more and bigger condo facilities to attract homebuyers. "If breakeven price remains high, how then can overall end-sale price come down unless developers are willing to sell at a loss?"
He said that the property market was very dynamic and it would serve the market well if the cooling measures are progressively tweaked in the same calibrated manner as they were introduced. This is because the cost of capital is no longer as low as when the measures were first introduced.
Efforts by Redas to improve productivity through the Building Information Modelling or BIM remain underway. "Our vision is that in three years' time, everything we do will be on BIM," Mr Tan said.
The system allows participants in the real estate value chain to share information, improve work flow and raise productivity. In the next few months, the 10 participating developers and their consortia will start implementing their projects by integrating BIM into their business; and training their staff and supply chain to use it.