Higher land bids will drive up housing prices: Redas

SINGAPORE — Record high prices for hotly contested land sales in the Republic this year will have a direct impact on future land sales in Singapore and will effectively lead to high housing prices, president of the Real Estate Developers’ Association of Singapore (Redas) Mr Augustine Tan said on Friday (July 7) at the sidelines of the Property Market seminar organised by the Association.

Buoyed by the inflow of Chinese capital in Singapore, units of China’s Nanshan Group and Logan Property submitted the winning bid above S$1 billion for a land parcel in Stirling Road in May, the first time that a purely residential site on the Government land sales (GLS) programme has exceeded that price quantum.

“Every piece of land sold sets a benchmark for the next piece of land sale. That is the concern. I fear that land prices will run to a situation that may not be healthy. We may not see it now but in few years’ times we will,” Mr Tan told TODAY.

He added: “The land prices have gone beyond the final product price backed by expectations that markets will improve… It will certainly drive up housing property prices as developers will expect a decent return. High land price equals high end product prices.”

Singapore is attractive to foreign investors given its long term value proposition, according to industry players. Capital-rich Chinese builders have set records here for residential land prices, both in GLS tenders and in the collective sale market, helping to boost sentiment in the housing sector but squeezing the profit margins of local builders, said analysts.

“Local developers are being priced out quite often and as a result of that their margins have been squeezed. The issue is here to stay for a while as the Chinese wall of savings is being exported in a way to Singapore through the land deals. So if the developers are going to pay that high price, they will hike residential property prices as surely they will not expect to make losses,” said Mr Derrick Heng, investment analyst at Maybank Kim Eng.

According to property consultancy Knight Frank’s Asia-Pacific Residential Review, the growth in outbound activity by mainland Chinese developers has been one of the key trends over the past decade, with volumes going from practically zero in 2009 to more than US$2.5 billion last year. From 2012 to last year, their favourite destination was Australia (36.5 per cent) along with other key markets including Hong Kong (23.7 per cent), Malaysia (19.7 per cent) and Singapore (15.4 per cent).

Chinese developers ploughed over US$5.1 billion (S$7.1 billion) into the Asia-Pacific residential market in the first three months of this year, according to the report.