With prices and sales of private residential properties rising across all market segments, the private property scene in Singapore is definitely heating up. According to industry specialists, this momentum is likely to continue till 2019. In fact, it’s been predicted that condos launched in 2018 and 2019 will cost anywhere from 7% – 13% more than comparable developments in the vicinity!
Why the predicted uptick in prices? Here’s the backstory: in the second half of 2017, demand for private property in Singapore started to increase, and developers closed the year selling a total of 10,566 private homes (32.5% more than what they clocked the previous year).
In order to replenish their land banks, developers started aggressively participating in collective sales and government land sales tenders. Because all developers who bought land in the past 18 months paid bullish prices, it’s likely that they’ll price their developments at a premium upon completion, and do all they can to avoid a price war.
Increasing land prices
How bullish is bullish? Here’s an example: CDL recently emerged as the top bidder for a land parcel in West Coast Vale. At S$472.4 million or S$800 psf ppr, their bid was a whopping 35.3% higher than the successful bid for a nearby site (where the upcoming Twin Vew development is slated to be launched). There’s no question about it… developers are now willing to pay through the nose for land parcels.
In order to moderate land prices, the government has started batching land tenders to close on the same day. Despite this, developers are still submitting multiple (and bullish) bids for land sites. The higher land prices will translate into higher total development costs, and this will eventually trickle down to the consumer in terms of higher sales prices.
Demand and supply forces will still prevail
On the bright side, the upcoming condos will still be subject to the same demand and supply forces. On the supply side, 2018 could see the launch of more than 20 private residential developments, with 12,000 units up for grabs in total.
Here’s where things get interesting: developers are under pressure to build and sell all the units in a development within five years from the time that they acquire their land. If they aren’t able to abide by this deadline, they’ll be liable to pay the Additional Buyer’s Stamp Duty (ABSD) amounting to 15% of the land parcel price. Bearing this in mind, developers are likely to price their projects reasonably, so that they’ll be able to sell off the entire project within five years.