Nov 7, 2011 - ST Forum
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
