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Could the industrial sector face cooling measures?
May 25, 2012
by Cheryl Tay The government could introduce yet another round of property cooling measures, following the upsurge in prices and demand. But this time, the industrial sector would be affected, according to analysts. However, such measures may not be necessary, as there are other ways to control industrial property prices, said analysts. Ease in obtaining mortgage loans with attractive interest rates was among the factors that boosted the residential property sector, and the same is now happening in the industrial sector. In Q1, industrial property prices rose 7.2 percent, based on the URA's Property Price Index. Consequently, fears that this might lead to a new set of cooling measures have arisen. But analysts would rather opt for other ways to tackle the problem. Nicholas Mak, Research Head at SLP International, noted that "there are property agents, who used to sell residential properties and they do it in a very aggressive manner, are moving into the industrial property market. And they are using that same tactics of very aggressive marketing. And they are not experienced in industrial property sector." Hence, real estate agents are urged to accurately market industrial premises and clearly state the specific use of an industrial property in the Sale and Purchase Agreement (SPA), which the URA requires from developers. Property experts also believe that it is not easy to discern investors from genuine users among the pool of industrial property buyers. They added that stringent restrictions on the use of an industrial space could harm businesses, which should ideally remain flexible amid an unstable global economy. Additionally, the government has increased industrial land supply to cool the sector, although new industrial sites under the Government Land Sales (GLS) programme are required to develop a single strata unit with a gross floor area (GFA) of no less than 150 sq m. Despite this, experts are not too distressed, given that the industrial sector accounts for a relatively smaller segment of the property market. Donald Han, Special Advisor at HSR, noted, "The reason the government has not taken a more proactive measure is mainly because the number of transactions that we have seen in the industrial sector is probably 15 percent compared to the whole transaction volume."