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Thanks Martin, more comprehensive this round to maintain sanity in the current red hot speculative investment theme.
But one major issue remain, URA’s so called “Minimum Bid Price” for GLS. This number is a secret and URA had refused to sell land when the bid comes on below the secret number last year. In fact, URA announced that piece of land was subsequently transferred back to Reserve List. It will only go back to Confirmed GLS list when any developer commit to bid at a certain price that URA can agree with. To me, this practice is not in accordance to the Demand & Supply policy. That incident had forced developers to bid higher and higher as they benchmark the recent prices, to improve their chances of securing lands. My rough calculations is that land cost make up at least 65% of final selling prices of units. These probably explained why prices kept going up even after so many rounds of cooling measures.
All agents I talked to used this scared tactics in their sale pitch : prices will only go up because government do not and will not sell land at bid lower than the last sale. They would cite that incident to support their claims. So effectively, the last transacted price becomes the price floor as each try to out bid one another. It did seems to me that buyers were more afraid of escalating land prices (if they don’t buy immediately) than the previous 6 rounds of cooling measures.
I spoke to 2 agents this morning, to hear their views. Their belief is still that prices will not drop, may be just a little bit for a short while. Demand will drop but not for very long when people see land bid prices continue to go up. Fear will overcome the buyers to jump in again. Interest rate will stay low for a few more years, so no concern. I don’t necessarily agree with all their analysis though. But I do hope that prices will moderate. HDB also benchmark their BTO prices at a certain discount to private properties. It’s a chain effect. So I think that if the government is serious about making housing affordable to Singaporean, that URA policy must be review and dealt with. Hope Singapore becomes a better place to live with lower housing prices inflation and people can save more for retirement instead of paying debts until 65.
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