Straits Times: Mon, Nov 07
THE Government should review its current land sale policy ('Govt rejects lone bid for Paya Lebar site'; last Saturday).
Property prices are primarily determined by the forces of demand and supply, but the reality is that land cost, being the single largest cost component, drives the price floor on which developers peg their selling price.
If the current policy artificially props up land value, then the real estate market could become dysfunctional since there would be an upward bias in the end product price.
Primary metals and other natural resources, such as oil and gas, are also subject to the forces of demand and supply, and their traded prices reflect the underlying derived demand for the final end products from which they are made.
The Government should ensure adequate and continual supply of land as and when there is demand at a price that attracts competitive bidding.
By rejecting bids based on price alone or withholding supply of land, the Government could be sending a signal that it is trying to sustain land price, and this would feed property speculation frenzy, which distorts the healthy development of our property market.
The Government should release land constantly based on demographic profile and economic development, but should leave prices to market forces.
To ensure a sustainable development of the property market and fulfil its social role, the Government could tighten the development period and implement targeted measures to weed out speculative property developers accumulating land bank and non-owner-occupied property buyers crowding out genuine buyers.
Ee Teck Siew
Source: The Straits Times © Singapore Press Holdings Ltd
Martin Koh/ Sherry Tang