Many small-sized property developers are seeing themselves priced out by foreign companies and big players, as tender bids for government and private land reach record highs in the country. This has made it more difficult for smaller developers to acquire land for development.
In the latest tender results for state land, the number of bidders and offered bid prices escalated to all-time highs, creating a bleak gap between the bids of smaller firms and big players.
For instance, Invest-Ho Properties, a boutique property developer, had submitted a bid of $9.1 million for a site at Tampines Road but lost out to the highest bid of $16.25 million by Fragrance Properties.
According to Mr. Edwin Ho, manager of Invest-Ho Properties Group, it was the group’s first time to bid for a site under the Government Land Sales (GLS) Programme, as buying private land and freehold land has become more expensive.
Small property developers are also affected by the entry of overseas developers planning to expand in the country – driving land prices even higher.
“With the current Chinese tightening measures, some Chinese developers are moving to familiar overseas markets to capitalise on their reserves of cash,” said Mr. Colin Tan, research and consultancy director of Chesterton Suntec International.
Analysts said that the industry could see a major shake-up, which could force small developers to look elsewhere for business opportunities if this trend continues.
Mr. Nicholas Mak, a property lecturer from Ngee Ann Polytechnic, said: “It’s a little difficult for them to go for en bloc (sales) because some of the prices are very high. As a result, they will turn to land sales – and if the Government does not sell enough of such land, it will affect their businesses.”
Owner expectations from en bloc sales also pose a challenge for small developers, said Mr. Joseph Tan, executive director of real estate consultancy firm CBRE. “The gestation period is longer and by the time the land is available, the market and pricing may have changed,” he said.
However, while small and medium developers may find options with GLS land parcels, the supply of such lands that may be "palatable" to them are limited, said Mr. Mak.
Besides forging joint ventures, several small property developers are considering acquiring land overseas, as market watchers say that the situation could go even grim for them.
“But the road will hardly be a smooth one even with such alternatives as joint ventures requiring competitors to work together will be difficult for smaller companies run by families or centered on personalities,” said Mr. Colin Tan.
As for foreign markets, he said that smaller developers face the risks of inexperience and unfamiliarity.
For some, they would opt to wait on the sidelines and rely on other means to generate business.
Mr. Teo Tiow Guan, director of Vigcon Construction, which lost its bid of about $9.9 million for a site in Tampines Road site, said that as property development is not its core business, the firm can afford to wait for plots that could be available and are within their means.