Friday, March 26, 2010

Who sets the market rate? Private sector or URA?

The recent news have highlighted the sale of the reserve sites at Tampines and Ten Mile Junction in 2008.

In June 2008, a Tampines site first put up for sale by the government was not sold after the sole bid of $118 psf ppr was rejected after failing to meet the reserve price. However, in another tender exercise earlier this month, it was awarded to the top bidder at $421 psf ppr - 3.6 times the previous price. Similarly, a mixed-use site located at Ten Mile Junction, which had a failed bid of $162 psf ppr in April 2008, was awarded for $437 psf ppr in February 2010.

In this situation, it would seem to me that URA is the one setting the "market price", and not the market. Back in 2008, the market deemed that these 2 plots of land are worth that amount which URA disagreed by rejecting the bid (reserve price = minimum "market price").

Reading this article however reminded me about HDB flats. HDB has always indicated that the flat prices they have indicated are at a discount to "market price". So is the market price really the price which the market determines, or the "reserve price" that URA determines? It would seem that its the later. Does that mean that HDB flat prices are actually indirectly determined by URA? Is that healthy for the property market?

Personally, I'm never a firm believer of free market. I always believe that when the cat's away, the mice will play. There's no such thing as a free market as people will want to take advantage of each other. Regulation provides the direction of the market. However, the trick is when to stop "interfering" and provide a "light touch".

Drawing the analogy of a parent and child relationship. There will always be a time where the parent has to "release" the child and let the child experience the real world, while still keeping an eye out. The million dollar question is whether the "parent" will give us such freedom.

Judging from the recent news, I guess not. Over-protective parents are not healthy in the long run.


Anonymous said...

Hmm... u know i learnt a new word from this recent issue - "Balance". They will always interfere the market to make sure the balance is there. :)

chantc said...

The funny thing about market price is that there's always a high and a low price. It's not minimum and maximum price. Different definitions.

Visit Rhinestic's Knick Knacks @ Etsy for handmade goods and supplies!

Related Posts Plugin for WordPress, Blogger...