Tuesday, August 17, 2010

Releasing more land doesn't seem to push down the price

Today the government has announced that they may be releasing more land in the first half of 2011 if the demand remains strong. As written in my previous post, I do not think this will do anything in pushing down the price that the developers are paying for the land. Have you seen any drop in price in the recent land sales? Instead, we're seeing records being broken.

The problem I see is that there is a slight conflict of interest in the current process. The URA is interested in selling the land as high as possible. After all, it's revenue. However this will lead to an increase in property price and will lead to an overall higher inflation.

I still think that capping the land price to a certain percentage of the valuation as written in my previous post will force the developers to provide value added service instead of bidding up the price sky high. The prices will never stabalise if there is no change in the evaluation process of the land sales.

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