Major property developers, who were caught off guard by last year’s robust home sales, are now faced with fast depleting landbanks.
Based on research compiled by property consultancy firm DTZ, half of the 16 major developers in Singapore had less than 1,000 residential units left in their landbanks as of end-February 2010. Five other developers had between 1,000 units to 2,000 units.
The figures do not take into account strong home sales in March, which signifies that many developers’ landbanks would have contracted further by the end of last month.
March home sales include all 202 units in Hong Leong’s 76 @ Shenton. At Sentosa Cove, Ho Bee Investment recently launched Seascape, and City Developments launched The Residences at W Singapore Sentosa Cove.
According to several analysts, developers put off buying sites during the recession, when the property market outlook was bleak.
“During 2008 and 2009, many developers did not add sites to their landbanks,” said Chua Chor Hoon, research head of DTZ in South-east Asia. “Hence some were suddenly low on inventory when demand rose and they brought forward their launches.”
During late February, Mr. Simon Cheong, president of the Real Estate Developers’ Association of Singapore (REDAS), cautioned that a number of developers are now facing depleting landbanks after the brisk home sales in recent months. He said that property developers were surprised at the speed of the recovery in the property market.
The hunt for new residential sites has triggered a spike in both the price and the number of bids for state land tenders.
In response to the intense competition for sites, several land sales were launched by the government in recent months. More residential sites are likely to be added in the government land sales programme in H2 2010.
“Tender bids last year were aggressive,” said Ms. Chua. “We expect competition to be less aggressive this year as can be seen from the less aggressive, though not low, bids in the first quarter.”
However, the hunt for new residential sites is likely to continue unabated for a while. Boutique property firm EL Development, which launched and sold-out a few high-profile projects in 2009, has just one more development, comprising of 32 units, left in its portfolio.
“We have been looking to acquire new sites for a while now but we have not been successful so far,” said Mr. Lim Yew Soon, managing director of EL Development. “It (business sustainability) is really a pressing issue for us. We have been looking very aggressively for new sites over the last few months.”
Mr. Liam Wee Sin, chief operating officer of UOL Group, said that his group is planning to replenish its landbank. However, the company’s need is not as compelling since the group gets its income from a variety of sources such as residential sales, rental income from its hospitality business and its commercial properties, he added.
“We will look at the merits of each and every site put up for sale and then consider if we need to replenish,” said Mr. Liam. DTZ said that UOL has 1,074 units left in its landbank.
Other developers are worse-off. Based on a research conducted by DTZ, Wheelock Properties had 209 units left in its landbank, while Singapore Land had just 206 units as of end-February.
The landbanks of 16 developers amount to 21,886 units in total, which means that they hold more than half of all the unsold residential supply in the pipeline.
Official figures released by the Urban Redevelopment Authority showed that there were 34,234 unsold, uncompleted units of private housing in the pipeline as of end-2009 — projects without planning approvals not included.
Property developers expect home sales to remain strong for the year ahead. About 1,480 new homes were sold in January 2010, followed by another 1,196 units in February, taking new home sale figures to around 4,000 units in the first quarter.
Analysts said that demand for new homes is expected to be around 3,000 units for Q2 2010.
However, the buying activity has shifted slightly to the luxury and high-end segments, where developers have a higher proportion of unsold units, according to Tay Huey Ying, director of research and advisory at Colliers.
“Low landbanks are really an issue for the mass market but for the high-end segment, developers still have ample supply because of all the collective sale sites they bought during the last boom,” said Ms. Tay. “But high-end landbanks will also run out if sites are hard to come by.”