The years 2007, 2009 and 2010 can be considered a golden era for property developers.
Laden with vast liquidity from large profits on sold-out projects, it is no surprise that developers look at development sites with great appetite.
The aggressive bidding for the latest state sale of a residential site located at the corner of Canberra Drive and Sembawang Road was the second public tender to prove that the ramping up of land supply in Singapore has no major effects.
One of the main reasons for the good participation rate and high bids during a tender is the fact that some developers still need to replenish their land banks.
However, it is interesting to know that there are developers who continue to participate in bidding though they have already succeeded in previous rounds.
Reflecting on greater risks going forward, more joint ventures can be expected, with some having strategic collaborations with contractors. As there will be many projects coming over the next few years, it will be more difficult to secure a contractor over time.
Even the most seasoned developers are continuously surprised by the market trends. Some developers face a dilemma when their projects sell out within days following an aggressive bidding for a residential site.
There can be a scenario where sites are acquired faster than they are offered. This will probably happen even if land prices begin to fall to more moderate levels.
If developers continue unloading their apartments, the risks will be gradually transferred to investors. A cut in prices cannot also be expected when developers secure a good position.
It can also be argued that it is in the interest of developers to continue participating in land bidding even when prices are falling. In this case, the most susceptible are those paying the highest prices for sites, and those who have lower land cost can manage to undercut their competitors.