Competition for land remains strong despite weaker net margins


Despite facing difficulties in selling off their units, the competition between property developers still remains healthy as they are bidding with a more cautious approach. Thus many market watchers will be closely monitoring the outcome of the government land sale for the Alexandra View site (next to Redhill MRT Station) and the Lorong Lew Lian site (near Serangoon MRT Interchange) as we move into the final quarter of 2015.

Government Land Sale for Alexandra View site

According to reports, more bids are being seen in recent land tender exercises for each site as developers are eager to restock their land bank followed by the recent cut in land supply under the Government Land Sales programme. When comparing stats in 2015 with 2014, we’ve seen an average of 9 bids per site (from Jan to Sep 2015), an increase from 2014’s average of 7.3 bids per site.

Reduced number of sites for sale under the Government Land Sales programme for 2H2015

On that note, when comparing on plots which are sold this year to the earlier ones within the same vicinity, it has shown that bidding prices have come down. Property developers have been cautious with their bids due to the weaken margin buffers (refers to the difference between the current selling prices of new launch condo projects near the tendered site and the development cost of the project on the subject land for sale).

Singapore property developers net margins and forming consortiums
Stats showing property developers net margin weakening. Source: Business Times Singapore

It was mentioned that more developers are working together to form consortiums to bid for sites in order to lower their risk in this uncertain market. So far in 2015, none of the big developers such as Fraser Centrepoint, Far East Organisation, City Developments Ltd, Keppel Land or CapitaLand have won any sites and more often or not, they were being outbid by new competitors even if they were involved in the tenders.

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