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Thread: Developers' landbanks running low

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    Default Developers' landbanks running low

    http://www.businesstimes.com.sg/sub/...79791,00.html?

    Published April 5, 2010

    Developers' landbanks running low

    Many caught by surprise by strong home sales; trend likely to continue this year

    By UMA SHANKARI


    (SINGAPORE) Major developers, caught by surprise by strong home sales in the past year, are now faced with fast depleting landbanks.

    Research compiled by property firm DTZ shows that out of 16 major developers in Singapore, half had less than 1,000 residential units left in their landbank as of end-February this year. Another five developers had between 1,000 and 2,000 units.

    The numbers do not take into account strong home sales in March - which means that many developers' landbanks would have shrunk further by the end of last month.

    Sales in March include all 202 units in Hong Leong's 76 @ Shenton. At Sentosa Cove, Ho Bee Investment recently launched Seascape, and City Developments, The Residences at W Singapore Sentosa Cove.

    Analysts said that developers put off buying sites during the downturn, when the outlook for the property market was bleak.

    'During 2008 and 2009, many developers did not add sites to their landbanks,' said Chua Chor Hoon, head of DTZ's South-east Asia research team. 'Hence some were suddenly low on inventory when demand rose and they brought forward their launches.'

    In late February, Real Estate Developers' Association of Singapore (Redas) president Simon Cheong warned that many developers are now facing depleting land banks following brisk home sales in recent months. Developers, he said, were surprised at the speed of the recovery in the property market.

    The hunt for fresh residential sites has led to a spike in both the price and the number of bids for state land tenders.

    In December last year, for example, a landed housing site at Jurong West put up for sale by the government drew a whopping 32 bids. The winning bid of $38.5 million, or $254 per sq ft of land area, came from Chappelis, a unit of Wee Cho Yaw's privately held Kheng Leong. At other tenders, the top bids were sharply higher than analysts' estimates.

    In response to the intense competition for sites, the government has in recent months stepped up land sales. More residential sites are also likely to be added to the second half 2010 government land sales programme.

    'Tender bids last year were aggressive,' noted 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.'

    But the hunt for new residential sites is likely to continue unabated in the short term.

    Boutique property group EL Development, which launched and sold-out a few high-profile projects last year, has just one more development (with 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 managing director Lim Yew Soon. 'It (business sustainability) is really a pressing issue for us. We have been looking very aggressively for new sites over the last few months.'

    UOL Group's chief operating officer Liam Wee Sin also said that his group is looking to replenish its landbank. But he said that his group gets its income from a variety of sources such as residential sales, rental income from its commercial properties and its hospitality business. So the company's need is not as compelling.

    'We will look at the merits of each and every site put up for sale and then consider if we need to replenish,' Mr Liam said. UOL has 1,074 units left in its landbank, according to DTZ.

    Other developers are worse-off. DTZ's research shows that Singapore Land had just 206 units left in its landbank as of end-February while Wheelock Properties had 209 units.

    The 16 developers' landbanks amount to 21,886 units in all, which means that they hold over half of all the unsold residential supply in the pipeline.

    Official figures from the Urban Redevelopment Authority show that there were 34,234 unsold, uncompleted units of private housing in the pipeline as of end-2009. But this number does not include projects without planning approvals.

    For the year ahead, developers expect home sales to remain strong. Some 1,480 new homes were sold in January this year, followed by another 1,196 units in February - pushing the estimated number of new home sales in Q1 to about 4,000 units.

    Demand for new homes is expected to be around 3,000 units for the second quarter, analysts said.

    The buying activity has however moved slightly to the high-end and luxury segments, where developers have a higher proportion of unsold units, says Tay Huey Ying, Colliers' director for research and advisory.

    That will work in some developers' favour. '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,' Ms Tay said. 'But high-end landbanks will also run out if sites are hard to come by.'


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    Quote Originally Posted by mr funny
    Published April 5, 2010

    Developers' landbanks running low

    Many caught by surprise by strong home sales; trend likely to continue this year

    By UMA SHANKARI

    (SINGAPORE) Major developers, caught by surprise by strong home sales in the past year, are now faced with fast depleting landbanks.
    Why are developers "caught by surprise"?

    Is it because they have read the following Goldman Sach report issued on 13 January 2010, and chose to stay on the sidelines in the en bloc market until demand returns more visibly in 2H 2010 ?

    Quote Originally Posted by Reporter

    Green Lodge tender receives ‘a few’ bids
    The Business Times
    Thursday, 14 January 2010

    In a report issued yesterday, analysts from Goldman Sachs expressed reservations over the return of collective sales activity for now. ‘Even though developers are financially stronger, we think they will choose to stay on the sidelines in the en bloc market until demand returns more visibly in 2H 2010,’ they said.
    Quote Originally Posted by jlrx, January 14, 2010
    Is this type of meaningless statements all "analysts from Goldman Sach" are capable of issuing?

    The developers who made the most money buying en bloc sites were those who bought when there was hardly any demand in sight. e.g. when Wheelock bought the Singapore Press Holdings site at River Valley for $400 psf ppr in 1H 2005, at where The Cosmopolitan is now selling for $1,900 psf.

    Whereas CapitaLand, which bought Farrer Court for $783 psf ppr when demand returned visibly in 2H 2007, is still stuck with the land.

    Once demand returns visibly, developers who try to get into the en bloc bandwagon will have to face:

    1. Many competitors who think similarly.

    2. A much higher reserve price set by the "greedy pig" en blockers (That's what they called us ... Hmmmph!!! ).
    moneyspinner has asked this question in the Property Market Sentiments 2010 thread:

    Quote Originally Posted by moneyspinner
    So, now what do you think the developers should do to replenish their landbanks? Increase enbloc sales coming leading to another spike in property prices with increase in rentals for displaced tenants?
    I think they're going press one of these "panic" buttons very soon.


    Seriously, how can the quality of those 99-year Government land compare with high quality freehold land from en bloc sales?

    In the first place, if those government land are so good then there would have been humans staying there instead of wild dogs and ghosts.

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    Quote Originally Posted by jlrx
    Why are developers "caught by surprise"?

    Is it because they have read the following Goldman Sach report issued on 13 January 2010, and chose to stay on the sidelines in the en bloc market until demand returns more visibly in 2H 2010 ?



    moneyspinner has asked this question in the Property Market Sentiments 2010 thread:



    I think they're going press one of these "panic" buttons very soon.


    Seriously, how can the quality of those 99-year Government land compare with high quality freehold land from en bloc sales?

    In the first place, if those government land are so good then there would have been humans staying there instead of wild dogs and ghosts.

    developers caught by surprise ?

    why ?

    becos even themselves think prices are way too high .. they dont want to take that risk ...

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    Quote Originally Posted by proud owner
    developers caught by surprise ?

    why ?

    becos even themselves think prices are way too high .. they dont want to take that risk ...
    Assuming the strong demand continues which I think it will because of the exceptional low interest rate environment, developers will have no choice but to try whatever means to replenish their land banks. Otherwise, they go out of business. Its that simple. One cannot win the game both ways!

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    Quote Originally Posted by moneyspinner
    Assuming the strong demand continues which I think it will because of the exceptional low interest rate environment, developers will have no choice but to try whatever means to replenish their land banks. Otherwise, they go out of business. Its that simple. One cannot win the game both ways!
    does tat means the the developers will bid higher for those newly release lands in order to get a piece of land so they can catch this crazy buying trend? then the property prise will be higher n higher again......

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    Looks like en-bloc trend is coming back again soon

    New multi-millionaires in Singapore are cooking...Time for developers to re-invest their monies made from sales of new launches back to the general public.

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    Quote Originally Posted by moneyspinner
    Assuming the strong demand continues which I think it will because of the exceptional low interest rate environment, developers will have no choice but to try whatever means to replenish their land banks. Otherwise, they go out of business. Its that simple. One cannot win the game both ways!
    Quote Originally Posted by Blue
    Looks like en-bloc trend is coming back again soon

    New multi-millionaires in Singapore are cooking...Time for developers to re-invest their monies made from sales of new launches back to the general public.
    Actually, there is a WIN-WIN situation for everyone - PROPERTISM.

    Since every developer now knows that everyone else is running short of land, just stop selling the remaining few properties they have in their stock.

    Just hang a sign outside their showrooms "CLOSED"



    Then they can see the wonders of the TRUEST RELIGION OF ALL TIMES - PROPERTISM!!!

    PROPERTISM Rule No. 1 - Property prices always go up in the long term hence properties should only be bought and not sold.

    The ASSET column in their balance sheet will keep growing and growing and growing, without them having to do a single thing!

    You can actually make much more money in properties by not doing anything, than by doing lots of things.

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    http://www.straitstimes.com/Money/St...ry_510923.html

    Apr 6, 2010

    Developers 'not rushing' into en bloc market yet

    By Joyce Teo


    MORE projects are expected to be put up for collective sale this year as the property market continues to hot up.

    This should bode well for developers keen to beef up their land banks, but they are not rushing into the en bloc market just yet, experts say.

    'The problem in the en bloc market is the gap between what sellers want and what developers are prepared to pay,' said Ms Chua Chor Hoon, DTZ's head of South-east Asia research.

    Colliers International executive director of investment sales Ho Eng Joo said: 'Developers are hungry, but they would not take too high a risk to acquire land. The prices en bloc sellers are asking now may not yet be justified by what the new projects nearby are fetching.

    'Given a choice, they would rather bid for a government land sales site than a private plot.'

    Government land sales sites are usually located in established residential areas with ready comparable projects, making it easier for developers to work out their sums, he said. The sale process is also neater and faster, experts said.

    The collective sale process, they said, can drag on if there are strong dissenters.

    Unhappy minority owners have, in the past, taken their estate's collective sale case to the High Court and the Court of Appeal. This means that timing can be a big problem with collective sales.

    In such a sale, both sides want to protect their interests. The developers would not want to bid too high in case the market does not turn out to be as strong as expected, said Ms Chua.

    But sellers want to secure a higher price to safeguard their position when the deal is sealed, in case prices continue to rise and they are unable to afford a similar replacement property, she added.

    But until prices of new private home launches improve further, the en bloc market may not take off in a significant way yet, said Mr Ho.

    In the meantime, developers will still be very keen on government land sales sites. They are particularly interested in mass market sites, considering that most of the launches so far are in the mass and mid-market segments, experts say.

    Ms Chua said the slide in developers' residential stock halted late last year.

    Developers' stock of unsold inventory has improved from the third quarter of last year, when they had 36,481 units on hand, to a total of 40,224 units at the end of last year, she noted.

    But they will still need to replenish and buy at a fairly aggressive pace if they continue to sell a lot, she said.

    DTZ's research shows that half of 16 major developers here had fewer than 1,000 residential units left in their land bank as of the end of February.

    Sales of new private homes have been brisk in the first quarter, with total sales estimated at close to 4,000 units.

    Nevertheless, if such sales come down to a more sustainable level of fewer than 3,000 units a quarter, the tight supply situation should ease gradually now that the Government is pushing out more sites for sale, said Ms Chua.
    Attached Files Attached Files

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    Quote Originally Posted by mr funny
    http://www.straitstimes.com/Money/St...ry_510923.html

    Apr 6, 2010

    Developers 'not rushing' into en bloc market yet

    By Joyce Teo


    MORE projects are expected to be put up for collective sale this year as the property market continues to hot up.

    This should bode well for developers keen to beef up their land banks, but they are not rushing into the en bloc market just yet, experts say.

    'The problem in the en bloc market is the gap between what sellers want and what developers are prepared to pay,' said Ms Chua Chor Hoon, DTZ's head of South-east Asia research.

    ... But until prices of new private home launches improve further, the en bloc market may not take off in a significant way yet, said Mr Ho.
    Like I have written in the previous post, the best thing for everyone to do now is to practise the PROPERTISM religion:

    PROPERTISM Rule No. 1 - Property prices always go up in the long term hence properties should only be bought and not sold.

    1. All developers close their showrooms and let property prices shoot through the roof (or each developer sells just one property per year to the highest bidder, to create a market value so that they can "mark to market" for asset revaluation purposes, see point No. 5 below).

    2. All en bloc committees keep increasing their asking prices, so as to be eternally out of reach of developers.

    3. All developers refuse to buy any en bloc land and just fight to their death in government land tenders, thus further depleting their land banks.

    4. Property prices continue to shoot through the roof, thus causing en bloc committees to further increase their asking prices, so as to be eternally out of reach of developers.

    5. Developers just keep updating the "asset" column in their balance sheet to reflect the rocketing value of their portfolio, posting record profits year-after-year due to "revaluation gains", even though "sales revenue" remains zero.

    6. I just have to keep updating my property spreadsheet to reflect the increasing value of my portfolio.

    That's why I have written in the post above "You can actually make much more money in properties by not doing anything, than by doing lots of things.".

    All one needs to do to embrace the PROPERTISM religion is to correct one's wrong concept, usually imbued since young, that money must be paper currency. Property is also money.

    “The modern banking process manufactures currency out of nothing.”.
    -
    Lord Josiah Stamp, Former Director of the Bank of England (1937)

    “At the end fiat money returns to its inner value—zero.”
    - Voltaire (21 November 1694 – 30 May 1778)

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    The only possibility if developers keep persisting not to go into en-bloc (expensive) option:

    Less new launches since their land bank depleting. Our Gov't only sells land in non-popular districts => Reduced new supply will boost resale / subsale market!!!

    Either way, new millionaires are still cooking! But of course, en-bloc is more lucrative!

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