Singapore real estate market is very transparent in terms of the data availability on real estate deals that is publicly available. Extending to the earlier blog post (link here), I did a back testing on selected government land sales (on a psf ppr) compared against the median psf achieved for the project and did a ratio analysis on the cost of land vs. the cost of sales (i.e. flour vs. bread).
The above throws up some interesting observation.
This reflects that developer are able to improve their margin largely due to lower land cost as property prices has been on a downtrend since 2013 based on the property price index.
The winners on the above ratio are that of High Park Residence and Clement Canopy. This validate the ‘upgrader’ market we are seeing in Singapore whereby the price of HDB within the vicinity provides a good support and market for such developments.
Quoting Wing Tai Holdings chairman and managing director Cheng Wai Keung in the press release for Wing Tai 30 June 2017 full year results:
“The result has been a “strange phenomenon” where prices in the general upgraders’ market have been driven up to the point where they are now close to values in the costly Orchard Road fringe area.”
just as the over-bullish land bids in 2013 resulted in a poor bread to flour ratio, developer are currently out full force in their land bids and you can see from the papers that a development is up for en-bloc everyday. Case in point in district 3 (yes again), a land bid at Stirling Road was awarded for over S$1 billion at $1,050psf ppr which is not very far off the bid in 2013 for Highline Residence.
In the same vein, developers who have residual land bank obtained over the past 2-3 years “low cycle” is set to benefit from the improved sentiments. This have to a certain extent been reflected in share price of developers such as City Development, UOL, Fraser Centrepoint Limited, Bukit Sembawang and Guocoland.
The next development which is launching is incidentally at Fernvale which is the best performer based on the above analysis by Sing Development – Wee Hur. Using the median price achieved by High Park Residences (which is fully sold out), the ratio projected is fairly comparable to recent developments launched.
The writer had over the past 3 years been vested on Bukit Sembawang, City
Development and is currently vested on Guocoland, Wing Tai, Goodland, Wee Hur
and Chip Eng Seng.