More such land will also be released as Govt moves to stem rising prices
By Esther Teo, The Straits Times, 12 Jun 2012
THE Government is slashing lease terms for industrial sites sold in the second half of this year in a bid to stem the soaring prices of these sites. As fast-rising costs crimp the bottom line, the Government is also rolling out a bumper supply of industrial land with these shorter leases.
The Ministry of Trade and Industry (MTI) said yesterday that all sites to be sold in the industrial Government Land Sales (GLS) programme from next month to December will be capped at 30 years. Previously, industrial sites sold had tenures as long as 60 years.
A total of 47.69ha of land - about 1.4 times last year's total - will be put up for sale this year in areas such as Tuas, Ubi, Serangoon and Woodlands.
'The tenure reduction increases the Government's flexibility for land redevelopment and would help to make industrial property more affordable for industrialists,' MTI said in a statement.
The tenure of all unsold sites under the previous GLS will also be capped at 30 years.
Experts expect the move to curb industrial land price rises. Industrial land prices surged a staggering 27 per cent last year, then rose a further 7.3 per cent in the first three months of this year.
The issue of high land prices and high rents has been a pressing one among local companies and small and medium-sized enterprises, already facing a painful adjustment from the restructuring of the economy.
A rough estimate indicates that a 30-year lease site could attract a 20 per cent lower bid than if the lease was 60 years.
SLP International executive director Tricia Teo agreed that shorter leases were one of the best ways to keep prices in check. She expects developers to 'bid more cautiously now as the shorter leases mean that developers will have less time to play with the site'.
But rents may not fall so quickly. 'Rents might come down only earliest next year as a surge of completed supply enters the market,' she said.
A supply of 500,000 sq m of multiple-use factory space is expected to be completed both in this year and next. This is about three times the average annual supply for the past five years.
Some industry players expressed concerns about the move, specifically if the 30-year cap is too limiting. Colliers International research and advisory director Chia Siew Chuin said the reduced tenure may be too short for industrialists, especially those with a longer-term business horizon.
Mr Lawrence Leow, chairman of the Singapore Business Federation's small and medium enterprises committee, said the greater supply will help cool the market and cushion price gains.
But while upfront costs are lower with shorter leases, he noted that construction costs, whether for a 30-year or 60-year building, are roughly the same. 'For low-rise sites, a shorter lease is okay, but for higher-density sites, a 45-year lease could be a good compromise instead,' he said.
MTI had earlier unveiled new rules to tackle rising prices as investors moved into industrial property, following residential property cooling measures.
One prohibits selected sites from being subdivided into strata units within 10 years of completion. There is also a stipulated minimum size on strata-titled units and units in multi-user industrial developments.
Developers also have to insert in sales contracts a clause stipulating the approved use of the unit.
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