Build (more) and they will buy...?

A study by Savills Singapore has put some hard numbers to the big lure of small apartments. Developers have been squeezing out more units on sites bought at state land tenders in recent years than was initially estimated.

The study was based on 51 private housing sites including seven executive condo (EC) plots sold under the 2006-2010 Government Land Sale (GLS) Programme and took in projects launched up to Aug 10 this year.

The total number of private homes actually generated on these sites will exceed the GLS Programme estimates by about 11%. Excluding EC sites, the surplus supply is slightly higher at 12%.

Urban Redevelopment Authority’s spokesperson said: “The estimated number of residential units in the GLS announcement is intended to serve as a guide only.”

Once developers that have bought sites at state tenders receive planning approvals, URA uses actual supply numbers for estimating pipeline supply.

Savills’ study shows that the supply from projects on each of the 8 sites exceeds the supply estimate in the GLS Programme by more than 40%. Savills found that a substantial portion of units in these developments are below 800sqft, and in some cases, even under 500sqft.

While shoebox units have fuelled the trend of developers minting more units in their projects, this was mitigated by ECs where units are larger. The government began selling EC land in 2010 after a five-year hiatus.

Another finding in the study is that the trend of producing “surplus” units over the GLS Programme supply estimate gathered momentum after 2007. Private residential sites tendered under the 2007 GLS Programme generated just about 3% more units than estimated in the Programme. This surplus increased to 9% for sites sold in the 2008 GLS slate, 14% for 2009 plots and – if EC sites are included – 15% for 2010 GLS sites. If EC sites are excluded, the last figure would be 19%.

Savills highlighted that projects with more than 40% “surplus units” generally have a substantial portion of small units. And 5 projects on sites sold under the 2006 -2010 state land sales programmes will yield at least 50% more units than the state’s estimates for these sites indicated in the respective Government Land sale (GLS) Programmes.

Source: The Business Times

Given the huge disparity between actual and estimated number of units generated, one should not be too surprised by the rising figure for unsold new private homes in the supply pipeline...

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