The growing number of unsold private homes and the weaker buying sentiment have forced developers to be more cautious with their land bids, said analysts and reported in the media.
Notably, sales of new private homes, excluding Executive Condominiums (ECs), plunged 55 percent to 4,400 units in H1 2014 from 9,950 units over the same period last year, according to data from the Urban Redevelopment Authority (URA).
“The location itself, if there are many other plots that are available or there are also other projects that are launching, the developer would also be very cautious and make sure they don’t overcommit, and make sure that the price they bought at will be sellable especially if this is not a centralised location,” said Lim Yong Hock, Key Executive Officer at PropNex.
Recently, two residential sites at Fernvale Road were sold for $234.9 million and $252.1 million.
Analysts noted the weighted average land price for the two sites stood at around $443 psf ppr, or down 17 percent compared to that of nearby Rivertrees Residences at $533 psf ppr.
With this, some market observers expect land cost to slow down, after it peaked in mid-2013.
Christine Li, Head of Research and Consultancy at OrangeTee, expects land prices to continue “to stay around 10 to 15 percent below what has been achieved in recent years.”
“This is partly due to the higher construction cost that the developers have to factor in, and also slower or lower demand for private residences,” she said.
Analysts revealed construction costs have increased by up to $350 psf, limiting developers’ ability to reduce house prices.
Going forward, developers are expected to be more conservative with their land bids, given that the government has clearly stated that it will not be relaxing the cooling measures just yet, said analysts.
Nonetheless, well-located sites are still expected to attract interest from developers.
Muneerah Bee, Senior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email muneerah@propertyguru.com.sg
Related Stories:
Review earlier property curbs: property consultants
Residents affected by SERS want wet market nearby
All HDB flats to have CCTVs by 2016
