Land sale runs into a ditch, as does Singapore’s competitiveness

This (above) is the plot of land that the Urban Redevelopment Authority (URA) said half a billion dollars was way too cheap. Last week, they rejected the sole tender bid offered for it. Meanwhile, office rents in Singapore are now the sixth most expensive in the world, jumping about 50 percent over 2010, as you can see from this report in Economist magazine:

The plot of land in question (ivory-coloured in the map below)  is close to Paya Lebar metro station. While that’s a huge advantage for commercial space, it brings its own complications construction-wise, because a tunnel runs underground along its western side, as you can see from this map:

You will have noticed immediately from the photo and the map that the site is also bisected by a concrete canal. Any sane developer would take seriously into consideration the difficulty of building on a site with tunnels and a canal running through it.

The URA in its advertisement 26 July 2011, ignored the tunnel and made a big deal about the ditch:

The 2.07 ha site, which can generate about 87,000 sqm of [Gross Floor Area], is envisioned to be good-quality mixed-use development comprising office, hotel and retail uses. At least 40% and 15% of the maximum permissible GFA of the proposed development on the subject site must be set aside for office and hotel use respectively. The remaining GFA can be for additional office, hotel, retail, entertainment or food & beverage uses.

A section of Geylang River flows through the sale site. This provides an excellent opportunity for the successful tenderer to integrate the water body into future development and bring life to the riverbanks. The developer is encouraged to transform the river into a clean, dynamic and aesthetically pleasing waterway . . .

I looked hard at that “river”. Even in a week with rain almost every day, it was nearly dry with dirty brown water stagnating at its lowest point. A scenic waterway it most certainly was not. But here’s the funny thing — even as the offer envisioned an aesthetically pleasing development, the same 26 July 2011 announcement by the URA said:

The tender will close at 12 noon on 18 October 2011. Selection of the successful tenderer will be based on the tendered land price only.

There you have it. The bottom line is price, price and price. You could design an ugly, brutalist stack of concrete boxes, and the URA really couldn’t care less.

In the end, there was only a single bid, a joint one by UOL Venture Investments Pte Ltd. and S.L. Development Pte Limited, for S$529.5 million, working out to S$6,086 per square metre of GFA (equivalent to S$566 per square foot of GFA),  According to the Straits Times, this was 35 per cent less than the price of a nearby plot sold just six months ago (Straits Times, 5 November 2011, Govt rejects lone bid for Paya Lebar site, by Esther Teo). Especially as the world economy is looking sickly for the next five years — even the China engine is slowing down — it should hardly be a surprise that that was the case.

On the one hand, you could say, well, if the economy is softening, we don’t really need the extra commercial space, so it’s no great loss if the site is not developed. On the other hand, you might argue that precisely because the economy is softening, we should take this opportunity to take advantage of lower costs, develop the site in order to offer competitive rents, thus lowering Singapore’s office costs.

The problem is the reserve price, an unknown figure that bureaucrats use to judge whether or not to accept a tender bid.

This time round, the URA’s announcement has reignited a debate among industry players on whether the Government should leave pricing to market forces or reveal the reserve prices of sites.

The reserve prices of confirmed sites are not disclosed to bidders.

The bidding consortium said they were ‘very disappointed’ at not being awarded the site, adding that it was a setback to decentralisation plans.

‘We had planned to hold the asset as a long-term investment. The rejection came as a surprise to us, given that our bid price was fair in view of the site’s technical challenges… recent global economic turbulences and enhanced market risks,’ it said.

‘As price consideration was the only reason given for the rejection, it would be useful that, for future land tenders, the reserve price be made known to the public as much cost and effort are put into submissions of such a scale.’

Mr Colin Tan, Chesterton Suntec International’s research head, said he was disappointed that URA did not award the site.

Developers often bid at higher and higher prices in a bullish market, leading to property prices increasing in tandem.

He said this was a missed opportunity to highlight to them that bullish bidding is not without risks as the developer winning the next site at a much lower bid will be a strong competitor when it comes to selling prices or rentals.

The system now appears to ‘protect’ the investment of the over-the-top bidder, and so leads to an upward bias in land prices, Mr Tan said.

Straits Times, 5 November 2011, Govt rejects lone bid for Paya Lebar site, by Esther Teo

As the report pointed out, our government land sales system contains a bias pushing up prices and serves to protect those who have bid foolishly high in previous rounds. In boosting average land values, it also increases property taxes. It’s a system that maximises revenue for the government and lays out a safety net beneath expensive developers, at the expense of Singapore’s long-term competitiveness. This example also undercuts the government’s claim that land values are left to market forces.

Moreover, although this site was zoned as commercial, it will no doubt have knock-on effects on land valuations of residential property, including land transferred to the Housing and Development Board (HDB) for public housing. Already, it is believed  — and the government, in its refusal to disclose details, has not said otherwise — that more than half the selling price of a 99-year leasehold of an HDB flat actually consists of notional land value alone.

We really need a more transparent system. A good place to start is a Freedom of Information Act and a determined push to Open Data.

31 Responses to “Land sale runs into a ditch, as does Singapore’s competitiveness”


  1. 1 Alan Wong 8 November 2011 at 13:41

    If it had been a bona fide tender, they would have made known their reserve price.

    Who knows, maybe it is a deliberate move to reject that sole bid so that later another interested party can bid again at a bargain premium without having to gamble and pay for unnecessary premium had they bidded in the 1st tender exercise.

    These kind of tricks of not awarding the tender to the lowest bid at the 1st instance are quite common as similarly in the case of developers who will make use of the lowest bid to bargain with other contractors to come down even lower.

    But for any govt agency to practise such tricks, it can simply be an abuse and betrayal of the whole public tender exercise.

  2. 2 Vote for Change 8 November 2011 at 13:49

    Wow, from the plan view of the site, to develop this plot of land itself would be an engineering nightmare. Based on the Code for Railway Protection, a stretch of land 6 metres from either edge of the tunnels would be classified as the first reserve where foundation works would not be possible. That itself would limit the amount of land you can develop. Stringent monitoring requirements would be needed in the second reserve. Temporary diversion of the canal would also be very costly and challenging. I suspect the ground would consist of Kallang Formation, the same type of clayey soil encountered at Nicoll Highway. Any excavation works would be very difficult and complicated.

    • 3 yawningbread 8 November 2011 at 22:57

      The unsuccessful bid was 35% below the sale price of a nearly plot, the newspaper said, and that may be why it was rejected. Actually if we take into consideration the engineering nightmare, which should justify a discount of 20%, and the economic clouds on the horizon (discount 15%), then the bid price seems quite fair.

  3. 4 Chanel 8 November 2011 at 13:59

    Alex,

    I must say that this is a well thought and well written piece. The government is obviously aware that allowing the 35% lower bid to go through would significantly lower property tax collections for many years to come from properties in the vicinity.

    In S”pore, rentals usually form a large proportion of business costs, but this simple fact is rarely (if at all) highlighted by the mainstream media. Instead, we are told ad nauseam that our labour rates are too uncompetitive, thus the opening of floodgates to cheap foreign labour.

  4. 5 The 8 November 2011 at 16:14

    And they wonder why property prices are going up relentlessly. When the market is hot, the highest bidder gets the tender, thereby increasing prices. When the market is not so hot, the sole bid is not accepted, thereby maintaining prices. That is why prices will always ratchet up. The sole bid should be accepted, if we accept that the market should be the ultimate arbiter or prices. The sole bid is still the highest bid.

  5. 6 Criticalist 8 November 2011 at 17:21

    The RP may not be officially disclosed to bidders but it is often unofficially known to them. The sale agent for the land sale is often very familiar with the potential developers. While that agent has to ‘officially’ act on behalf of the seller, they have to secure the sale to ensure their commission. It is common practice to ‘share’ the RP with developers so that they know how high to aim for or whether to back out, or whether they can negotiate for a lower RP. This is common practice with enbloc sales where agents such as Credo, Knight Frank, CBRE etc have long standing business transactions/relations with established developers.

  6. 7 thesingaporepropertybook 8 November 2011 at 22:30

    Surprising, economy doing so well. And only one bid..

  7. 8 Old Singaporean 9 November 2011 at 08:51

    It is a ponzi scheme and one day it will all come tumbling down. I can just hope that the powers that be are not thinking they can keep the music going while they plan their own exit. Given the possibility of the approach of the so-called perfect financial storm, perhaps the time of reckoning may not be that far away.

  8. 11 The 9 November 2011 at 09:41

    Many years ago, the URA tendered the plot of land at the junction of Orchard/Paterson Road (now developed into Wheelock Place). In the first tender, the top bid was rejected as it was then a red-hot market. If I remember correctly, the official reason given for the rejection was that the design was “not good enough”. Subsequently, the plot was re-tendered and won by the developer of Wheelock Place at a much lower price. Many tens of millions or even hundreds of millions lower (can remember the details). Can we honestly say that Wheelock Place’s design is that great?

    So, is history going to repeat itself. Is this a sign that the property market is toppish? Is this a harbinger of the things to come?

  9. 12 Guest 9 November 2011 at 09:49

    While I generally appreciate the quality of your analysis on most socio-political issues, I was rather disappointed at this piece and the misleading arguments you seem to have endorsed. Given the nature of the audience at sites such as yours I must first state categorically that I am neither pro-ruling party, nor anti-ruling party (as if such a simple dichotomy could even be employed in the first place). I believe, however, that educated citizens have a duty to contribute to national discourse, whether for or against prevailing policies.

    In this particular instance, apart from the possibility that the government has overestimated the land’s value (due to the technical challenges in development that you have highlighted), I would find no fault with the decision taken. Notwithstanding the fact that proceeds from land sales rarely find their way into citizens’ wallets (at least, not immediately), I think we can agree that the government’s primary responsibility is to extract maximum value from publicly owned resources for the public good – there is no reason why we ought to ‘give away’ these resources to private entities. In this case, this could take the form of selling land to the highest bidder, although alternatives which you have discussed such as requiring developers to ‘develop the waterway’ and provide a corresponding discount would not be ruled out.

    There are good reasons for not disclosing the reserve price, which I shall illustrate with a (very) simplified example. Suppose a piece of land is put on auction by the government, who has a reserve price of $200m. Suppose further that only two firms intend to bid for it, A being willing to bid up to $180m, and B up to $230m. If B knows roughly A’s willingness to bid and the reserve price, we can be certain that B is not going to bid the full $230m – more likely a value close to $200m, just enough to win the bid! On the other hand, if B did not know the reserve price, B will bid much closer to $230m – since that is still lower than $230m, B still expects to make a profit from this enterprise. The difference, then, is money that would otherwise have gone to the public purse. The only entities that will benefit from a disclosure of the reserve price are private enterprises, at the expense of the public.

    Even supposing the government’s valuation is overly optimistic, accepting a bid lower than the reserve price would be warranted only if that was the ‘ fair market price’ of the land. To see that, however, we need a healthy number of bids – one firm does not make a market. In this case, the government would have good reason to believe that the bids submitted are not representative of true ‘market valuation’ of the land in question. Furthermore, as the bidded value differs significantly from the government’s own valuation, without an additional, objective valuation of the land available I would say that the government’s decision to reject the bid is a rational one.

    I also found it particularly amusing that a firm, having bidded some S$530m for this project, would find significant the ‘cost and effort’ involved in surveying the land and submitting the bid. We do not, after all, pay much heed to gamblers who lament not having won after placing their bet; one ought to, after all, consider both possible successes and failures in deciding on a course of action. In this case, would the disclosure of the reserve price have led the company to bid the reserve price, or not bid at all? No company would bid more than what is strictly necessary to obtain the land; furthermore, if, as the company claims, their bid came from an objective evaluation of the land’s worth, then clearly since they aren’t willing to pay what the state deems it to be worth it would not be wrong for the state not to transfer ownership of the land to the company (again, I am not ruling out the possibility that the state’s valuation is an overestimate).

    I am also surprised that you would buy the argument that the ‘land sales system contains a bias pushing up prices and serves to protect those who have bid foolishly high in previous rounds’. While prices are most certainly higher under competitive bidding than if they were to be sold à la carte, developers set prices and rentals based on the highest price they can extract from the market – that has nothing to do with the original land price. If a plot of land in Orchard Road were to be given to a developer for free to be built into a shopping mall, would we then expect rentals to be significantly lower than in adjacent properties? I would think not. Given the amount of land and commercial property in private ownership the government’s immediate control over land and office rental prices is, at best, questionable (the same cannot be said for housing) – if anything, the only control mechanism would be to reduce, rather than prop up prices artificially, by releasing more land.

    Furthermore, I hardly see how charging developers high prices acts as a ‘safety net’ for them. This would be true if the government promised to both sell and buy land at a fixed (inflated, as you seem to argue) price – but as is evident this relationship does not hold. If government land sales were exhorbitant developers would simply shun them (as seems to be the result in this case) and instead opt to redevelop older properties. This system of auctions is as ‘left to market forces’ as can be (again, this does not hold for public housing).

    Lastly, I also wish to point out that land prices and competitiveness go hand in hand, rather than share the inverse relationship that you have suggested. While it is true that with higher office rental prices mean that businesses now need to be more profitable to stay afloat, one must remember that rental prices rose precisely because businesses were profitable. Likewise, while it is true that we higher office rental prices low-profitability businesses may no longer be viable, one must recall that they are replaced by their more profitable counterparts, and the economy is most certainly more dynamic and competitive as a result . I can scarcely think of an instance in which we face both high office rents and an uncompetitive, undynamic economy.

    • 13 Anonymous 9 November 2011 at 14:26

      this is a skillfully conceived and extremely well-worded response and i’ve enjoyed reading it as it parallels many of my own views on the original article.

      i especially appreciate the clarification on the role of the private developer as i feel that many people wrongfully demonize developers (i’d like to state for the record that i work for a developer) and somehow believe that the government and developers are complicit in squeezing buyers dry. there is certainly no free ride for developers at any level and of any scale and while i cannot deny that developers make profits on most projects, i feel that the public strangely believes that these profits are gargantuan beyond belief and always at the cost of the consumer.

      in our context, we operate and exist within a free market eco-system for goods and services of all types and as such the purchase of properties must also be subject to the same principles of supply, demand and consequently, price determination. transactions must be predicated on the acceptance of the developer’s price and subject to the purchaser’s own considerations as well and if so, the price can be said to be “correct”. expanding on what Guest has pointed out, the government does not intervene in property transactions after the land has been sold via the artificial inflation of housing prices or even provide any guarantees of the same.

      if you would recall, when the government spectacularly suspended the GLS program (in 2008 if i recall), developers themselves were left with a complete dearth of supply of land, an event that invariably led to skyrocketing asset prices as pointed out by then REDAS-chairman Simon Cheong and repeatedly and ferociously rebutted by Mah Bow Tan. in the aftermath of the resumption of GLS sales, property prices across the board spiked, but so did costs both of land acquisition as well as construction due to higher costs of labour, materials and equipment (mostly due to IRs). other government policies have a huge impact on property costs and hence downstream, prices, including increase in foreign worker’s levy and quotas. these are not obvious to the layman, though i hope them to be.

    • 14 suggestion 9 November 2011 at 15:51

      You said that “Lastly, I also wish to point out that land prices and competitiveness go hand in hand, rather than share the inverse relationship that you have suggested. While it is true that with higher office rental prices mean that businesses now need to be more profitable to stay afloat, one must remember that rental prices rose precisely because businesses were profitable. Likewise, while it is true that we higher office rental prices low-profitability businesses may no longer be viable, one must recall that they are replaced by their more profitable counterparts, and the economy is most certainly more dynamic and competitive as a result . I can scarcely think of an instance in which we face both high office rents and an uncompetitive, undynamic economy”

      Your point does not match with the evidence provided in the article.

      See office rents across different cities in the Economist article.

      The office rents clearly.do not correlate with the compeititiveness of the city.

    • 15 Gazebo 10 November 2011 at 06:48

      This is not to justify the Singapore government’s non-disclosure of the reserve price, but the same practice is done in the US. I do not think the US is the best example of good governance practices (actually it is often the worst!) but it is probably worthwhile to examine why it is the case.

    • 16 yawningbread 10 November 2011 at 12:30

      There are two separate elements in the first half of your comment. The second is that the process as currently used is defensible, and achieves the objectives of the first. The first element is “I think we can agree that the government’s primary responsibility is to extract maximum value from publicly owned resources for the public good” — but this is the very point in contention. Does it serve the overall public good for the government to maximise value? Because if it were, creating artificial scarcity would be the best way to do it. So long as the first point is in contention, the second — that the process achieves the first’s objectives, is moot.

      In the second half you argue that developers would take the windfall profit where available instead of lowering their rents. At a micro level, you are indeed right, but at a macro level, where supply is less restricted, the market rate would fall.

      As for your last paragraph, it sounds almost surreal. One cannot conjure “more profitable counterparts” out of thin air, creating a “more dynamic and competitive” economy., in order to justify ever-higher rents. At some point, rents become unaffordable to any business; or businesses move out to other countries.

      • 17 Vote for Change 10 November 2011 at 12:57

        “Does it serve the overall public good for the government to maximise value?”

        One cannot conjure “more profitable counterparts” out of thin air, creating a “more dynamic and competitive” economy, in order to justify ever-higher rents.

        The two points above are actually connected. If the government wants to maximise land value, business is bound to suffer. There is no such thing as a win-win situation.

        I would like to see what Guest have to offer as a counter-argument, if he has any.

      • 18 Guest 10 November 2011 at 20:41

        I agree that the rate at which the government releases land for commercial use is up for discussion – The ‘right’ amount of land to release is a question of achieving a balance between economic growth and land sales income, and would not be a simple matter of precision. As you rightly pointed out with each individual land sale restricting the supply of land would inevitably lead to increased land prices. Of course, were the government to give away all state owned land for free tomorrow, we can expect a significant jump in our (immediate) economic growth rate because more land would be available, more businesses can now operate, etc.

        The point I wanted to highlight was this – having decided how much land to supply to the market in a given sale, how ought the government allocate this land to interested buyers? Should it be on a first-come-first-served basis at a fixed price, by a lottery, or through an auction as is the case here? Aside from the issue of maximizing land sales revenue, there is also the issue of parity amongst buyers – with no other tender requirements it would be difficult to argue that the fairest way to sell the land would not be to allocate it to the most willing buyer. Again, I do not assert that this necessarily excludes other development criteria, for example the redevelopment of the waterway in this specific context.

        I think that the other issue here is whether the government ought to have rejected the sole bid, given that the bid offered was significantly lower than the government’s valuation of the land. If there are grounds to believe that the government would have been offered a significantly higher price at a later date, there would have to be very strong grounds for the land to be released now rather than later.

        Lastly, your point on rents and competitiveness seems to confuse cause and effect. Suppose the government stopped releasing additional land for commercial use. The amount of land already in the private sector is fixed and naturally limited; companies would compete for the right to use them, and hence as companies become more productive and profitable, one would expect the competition for land to lead to rising land prices/rents. Rising rents in this conditions, therefore, imply that firms are competing to use the office space, rather than a shift towards vacancy. The rents will never become unaffordable to all businesses because that would imply office space being usused, in which case landlord would once again lower their rents to attract tenants (they have no interest in having vacant properties). Of course, as I have said rising rents inevitably mean that some businesses will have to stop operating simply because they aren’t profitable enough to cope with increased rents. But this can come about only if there are other companies willing to pay more than them, reflecting greater competitiveness and productivity. My point here is that rents simply reflect the economic reality on the ground, and the effect of government land sales would in fact be to dampen the rise in prices, not increase it.

      • 19 Vote for Change 11 November 2011 at 21:42

        @ Guest, I generally agree with what you wrote, but I take issue with your last point. You seem to take a simplistic view of rent and land pricing. Why would businesses compete to pay more for the same area of land if everything is a constant? The government’s population growth policy is directly fueling business demand and indirectly creating competition causing rent to spiral upwards. If not for such competition, which business owner in the right mind would want to pay a higher rent? So your argument that the release of land will only dampen the rental market is half-baked at best and is only true if the government does not create business demands.

    • 20 octopi 14 November 2011 at 00:58

      I think that since you have provided such a good example of the prevailing corporatist neo-liberal conventional wisdom that has made life a living hell for a lot of people in Singapore, I’m duly obliged to whack it.

      First, it’s not really about whether you are pro ruling party or anti ruling party. People always draw a false dichotomy between the government and private enterprise in Singapore. First they share a cosy relationship with each other and secondly we all know that land prices in Singapore are high due to the joint actions of both the developers and the gahment, it takes 2 hands to clap. So government or developer, you all are part of the same system.

      Second, the assertion that it is a good thing for the government to get the most money out of a land sale for the coffers is extremely problematic. I can only think of one advantage in this: namely that it is usually extremely difficult to tax corporations. They are, as we know, pathological entities that have run amok, going to the country which is the most chickenshit about taxing them, and collectively bullying the governments into lowering corporate taxes. The land sale is one way of taxing them, one of the last remaining ways. And land is scarce in Singapore, so you do have to get a fair price. So the money goes into the coffers, and hopefully the government will see it fit to use it wisely. I think not. Probably it will go into some fancy toys like your F1, building nicer government buildings. Tasers and pepper spray for people who get bright ideas about Occupy Raffles Place. Maybe a little more will trickle down to the poor.

      In the end, though, the developer who gets the project at a highly inflated cost will just pass the cost on to the tenants who either get squeezed, or pass on to citizens like us who have to suck our thumbs and bitch and moan about the high cost of living. Nobody benefits in this case. The high cost of the land would have constituted a perpetual hidden tax, albeit one that is partially sloughed off into private corporate profits.

      Third, you actually argue that land prices and competitiveness go hand in hand. There is nothing intrinsically good about businesses being profitable. It is true that when you force businesses to be profitable, a lot of fat is cut away, and productivity rises. Productivity rising is something that is fairly dubious, as I’ll touch on that in a bit. Beyond that, it’s just that old story of forcing your workers to work harder and paying them less. That’s what your true profitability is. Basically it’s that old warped logic again – turning the screws on your people is good for them! Firms have to think of all ways and means to get more surpluses, just so that they can pay those same surpluses to your greedy developers.

      Productivity increases in general are not a good thing. When the means of production have evolved to such an extent as to require lesser and lesser human labour, it causes structural unemployment. Productivity increases are the main reason why wages in all segments of society are driven down, why there is 10% unemployment rate in the “developed” economies, and why workers of the world have so little bargaining power against the 1%.

      About the economy being more dynamic as a result, ants on a hot stove are pretty dynamic too. What the fuck is so great about that? Higher business costs do not force businesses to be competitive. They increase the risks that in the case of your business failure, you will be wiped out. Therefore you stick to the tried and tested old things and you drive out experimentation. It means that $2 for a nasi lemak becomes $4 for a nasi lemak. That’s all. There is no value add. There is no creativity. This piece of land will remain empty for the time being, but in advance of it being developed we already know a few things. 1, it will be a shopping complex with a cinema multiplex that shows Hollywood shit that nobody wants to see, but charging an exorbidant rate for it. It will have expensive spas that will sell expensive packages to people, and then shut their doors the next day, and CASE will come in and tell you that there’s nothing they can do. And it will have the first food court in Singapore where you have to pay $10 for the cheapest bowl of bak chor mee. (maybe not because one such food court probably already exists.) No, you got the cause and effect totally wrong. It is not small shops are more profitable and therefore rent goes up. It is rent goes up and after that small shops will either have to pull some crazy stunts to stay in business or they will have to shut their doors. High prices of land are not a good thing.

      Fourth, you may say that it is in the firm’s interest to get the bid down to the lowest level. But the firm doesn’t act. The agent of the firm acts. The manager of the project would be fearful that his grand plans do not come to fruition. When you work for a company, you seldom think about the firm getting the bid for the lowest price. Instead, you are competing with your fellow managers, each having their own portfolios, and whose performance appraisals depend on bringing their project to fruition no matter what the cost. So it’s actually a greater cost to them to have their project fail, than to overbid for a piece of land.

      And to add to that, the firm doesn’t really want the price to be kept down. Because the price of the latest sale is actually what determines the amount of rent that they can squeeze out of the rest of their vast portfolio. So they may just overpay on one plot of their land. But then in all the shopping malls across the land, from Tampines to Jurong, they can start jacking up their rents even more. So of course they are happy with the higher price. And that’s how the safety net argument comes in: so long as land prices are going up at a ridiculous rate, they will be protected from their overinvestment, and continue to wreak misery on their tenants.

      And once land prices have gone up, it will take a lot to make them go down. As you have rightly pointed out, if you were to give out a plot of land in Orchard Road for free, a developer would obtain it and charge exorbitant rents. A lot of plots of land will have to be offered for a very low price to cause a property glut, and a lot of plots of land is what Singapore does not have. The only solution is union action, for all the shopkeepers in Singapore to simultaneously shut down their stalls and turn one shopping complex into a ghost town to punish a developer. This is actually one good argument for the government to keep on putting everything on 99 year leases, because it means that at least after 99 years, the government will get another opportunity to reset all land prices to a saner rate.

      One day, all of you developers will get your just desserts. Nobody will want to buy your expensive shit anymore and clutter the precious living space in their cramped apartments. Nobody will want to rent your retail business. Everybody will go online and buy their goods there instead. And you will have to go on your knees to the government to increase the population of Singapore to 8 million just to keep your fucking portfolios from going under.

      The bottom line: it is through joint action of the gahment and the developers that squeeze all segments of society – the small businesses, the consumers.

  10. 22 tk 9 November 2011 at 11:32

    ever increasing RP
    means developers have to increase finance. not a problem in a world of EZmoney.
    means developers have to build cheaper, shoddier, buildings and increase rents to maintain yield.
    means businesses have increased costs.
    means businesses must charge customers more, or have lower profit margins, or both.
    means customers pay more.
    until they won’t, or can’t.
    means business closes down.
    means no rental income.
    means no yield.

    crash.

  11. 23 politicalwritings 9 November 2011 at 13:30

    Have you thought of the consequences of award? What will happen to all the land prices all round?

  12. 24 Raymond 9 November 2011 at 14:41

    Hi Alex

    Great piece. I got a question : if URA told ST
    in today’s report price is not only consideration , how come the announcement
    you pulled says they will only select based
    on price only?

    Raymond

  13. 27 The 9 November 2011 at 15:11

    /// Guest 9 November 2011 at 09:49
    In this case, this could take the form of selling land to the highest bidder, although alternatives which you have discussed such as requiring developers to ‘develop the waterway’ and provide a corresponding discount would not be ruled out. ///

    In this case, the highest bidder is the joint bid by UOL Venture Investments Pte Ltd and S.L. Development Pte Ltd.

  14. 28 anonymous 9 November 2011 at 16:05

    Rejecting a solitary bid is fine and good procedurally, but there are some considerations:

    1. Did URA perform any soil investigation or similar engineering survey works to determine how complicated it was to construct in this area vis-a-vis nearby plots? If not, is the reserve price a fair reflection of the “true value” of the land?

    2. Does it still make sense to keep the reserve price confidential? Sure, it prevents developers from colluding to cap their bids. But preparing a bid requires resources, for cost-benefit analyses, market surveys, etc. Does it make sense to make the developers bear all the downsides of a failed bid? Does a price floor help rentals in the longer term by introducing a price floor with no price ceiling? Does it affect Singapore’s competitiveness?

    While I agree it’s not fair to single out this isolated incident as a failure in the bidding process, I think that the govt needs to be more transparent in how it sets the reserve price, and be clear whether engineering complications were adequately factored into that figure.

    If they can “encourage” developers to turn the longkang into a beautiful waterway, I can’t see why they should not bear a bulk of the blame for their failure to attract developers to submit competitive bids. After all, this is a plot of land that is right next to an MRT interchange that they’ve left vacant for some time, even before they built MRT tunnels for the circle line.

    Now that it can’t be sold, the state gets $0, and wasted all that manpower preparing the tender. Just great.

  15. 29 midknight 9 November 2011 at 18:35

    the property market in Singapore is a con job created and perpetuated by the government for the last 50 years..

  16. 30 Anonymous 11 November 2011 at 08:06

    Maybe the govt is using volume of bids as a feedback mechanism…

    ie. If no bidders or only one bidder in this case,

    translates to no or little interest or demand for office space in this area

    And further translates to no more releasing of govt land for office devt in this area!

    Not surprising for this to hold true as bureaucrats in this country is known for not being up to date with current local conditions..

    Remember when goods vehicle COE dipped to $1 for an extended period of time (back in 2007 if I recall correctly) due to the whole Euro 4 fiasco, which resulted in the whole commercial vehicle market collapsing.. as the distributors then had NO or very little models that comply with the euro 4 standard.

    Then existing owners of goods vehicles, even some of those with vehicles that are just a mere 6 years into their first 10-yr COE, renewed their COE at the the prevailing grand price of $1! And this is despite most goods vehicles are scrapped at or before the 10-yr mark as they are normally veey well-used..

    Now how r u going to convince these owners of now aged black smoke spewing goods vehicles to scrap their vehicles if they r going to get mere cents back in COE rebate?

    And look at what this fiasco has done for the recent price of goods vehicle COE of more than $40,000!! Add to that a possible 20% cut in supply of goods vehicle COE within 6 months..$60k goods vehicle COE soon?? How is any small biz owner or startup going to be able to afford a small goods vehicle anymore?

    Seriously, when will they come down from their ivory tower to be amongst us plebeians and understand how their policies are wrecking havoc in our lives.. Get ready for 20% increase in hawker food!

  17. 31 Yujuan 12 November 2011 at 13:05

    Here is a hypothetical question. Say there are 2 bidders whose bids are close to each other, with one just a whisker higher, would the Authorities proceed with the sale.
    If the answer is still no, then URA is as much a culprit in maintaining the bubble like state of Singapore’s property market, by insisting on getting the selling price as closely as possible to prevailing market value. Greed is at play, just like in the private sector.


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