Singapore’s property market seems to be heating up, judging by a range of indicators, including a sharp rise in bids for development sites by foreign developers.

Just this week, an entire executive condominium project in Hougang, Hundred Palms Residences, sold out in hours. Add to that a slew of collective sales after years of slumber in that sector, and, perhaps most significantly, land prices that have been climbing to eye-watering levels.

Foreign developers, in particular, are in the spotlight after so far winning four of this year’s eight government land sales (GLS) sites in spectacular fashion. Many of these winning bids involved record prices, such as Hong Kong-listed Logan Property and Chinese developer Nanshan Group’s record billion-dollar bid for a land parcel in Stirling Road, which marked the first time a purely residential GLS site crossed the billion-dollar mark.

The headline-grabbing figures drive the perception that foreign developers are driving up land prices with aggressive bidding. Data showed that foreign developers are indeed more aggressive with their bids.

The premium of the winning bid over both the median bids and the second-highest bids in each tender was analysed. The highest premium in terms of the winning bid, compared with the median, was a Chinese-based group’s bid of $75.8 million for a landed housing site in Lorong 1, Realty Park in Hougang. The tender closed in June. The group includes a unit of Hong Kong-listed Chinese developer Fantasia Holdings, and bid a whopping 40.7 per cent over the median bid, and 22.2 per cent over the second-highest bid.

Its optimism was followed by Malaysian developer S P Setia, which paid $265 million for a site in Toh Tuck Road. In a hotly contested tender of 24 bids, which closed in April, it beat the competition by a 30.4 per cent premium over the median bid, though just 1.9 per cent over the second-highest bid.

Among this year’s GLS tenders, Logan and Nanshan’s winning bid for the Stirling Road site was also notable for tabling the highest premium over the second-highest bid, excluding Fantasia’s Lorong 1 Realty bid. It put in 8.3 per cent more than Hong Kong developer MCL Land (Everbright). It was 18.7 per cent over the median bid.

The proportion of foreign bids out of total bids has risen from 25 per cent of total bids in 2015 to 34 per cent so far this year. This includes consortiums where at least one partner is foreign. It was also found that foreign developers are more inclined to bid aggressively for sites they are keen on.

When foreign developers win sites, their winning margin over the second-highest bid since 2015 is an average of 5.6 per cent – compared with local developers who win by 3.4 per cent.

Also, foreign bidders as a whole, even if they are not the top bidder, tend to put in bids much closer to the winning bid than local developers.


Foreign developers have very different reasons for property development here from local developers.

Many developers, particularly from China, view property development here as fulfilling strategic needs and absorbing excess capacity as the pace of developing projects slows in China. By developing projects here, they can send their excess manpower to work here, while inventory, such as purchased material, can be put to use here.

Also, foreign developers are keen to expand their portfolio and build their brands.

They also have bigger financial muscle and the quantum here is nothing compared with what they have to pay elsewhere.

For instance, Logan Property purchased a plot of residential land in Hong Kong, via a joint venture, for US$2.17 billion (S$2.9 billion) in February.

Foreign developers are not hampered by the rear-view mirror, as they may not have won sites here previously, and they tend to look forward – their optimism is reflected in their bids.

Mr Derek Lee, investor relations director of Logan Property, said profitability was key in deciding on its maiden foray abroad. Most of its projects are in Hong Kong and Shenzhen. “The gross profit margins in Singapore may not be comparable to Shenzhen’s, but it is definitely comparable for net profit margins, as the tax systems in Singapore and Hong Kong are simpler and the tax lower,” he said.

The company also wanted to diversify, Mr Lee said, as all its assets in China are in yuan but the company has some US dollar- denominated debt. In the second quarter of this year, the company issued about US$800 million worth of bonds on the Singapore Exchange, and developing projects in Singapore “will have benefits for our bonds”.

Mr Wang Lian, managing director of Fantasia Investment, noted that the company wants to expand in Singapore and the region, in more than property development. It has a condominium-management business and a technological solution for “smart condos”, and has signed up 50 condominiums for this smart-home solution, he added.


The current bidding situation has been described as “boxers from different weight classes coming into the same ring”. The tough competition had already caused some local developers to bulk up their bids, such as Chip Eng Seng’s recent win of the Woodleigh Lane site.

It paid $700.7 million for the site, 16.2 per cent above the median bid, edging out bids from a joint venture between units of Keppel Land and Wing Tai, as well as Verwood Holdings and Logan Property.

One outcome of the increased competition is likely to be lower developers’ profits.

Developers declined to reveal profit margins, stating that they were looking for double digits, but a check on properties in the Tanah Merah/Bedok area showed that higher land prices are likely to have caused developers’ profit margins to come down over time.

A consortium including Far East Organization purchased the site for eCo condominium in Bedok South Avenue 3 for $534 psf in February 2012, but sold at $1,300psf at its launch in late 2012, posting a 58.9 per cent difference between the land price and the sale price.

A later project in the area like Urban Vista posted a 49.9 per cent price differential when it was launched in early 2013. Fragrance Group and World Class Land paid $676 psf for the land and launched it at $1,350 psf. Likewise, The Glades recorded a 47.2 per cent price differential when it launched in September 2013, as it paid $791 psf for the land and launched at $1,500 psf.

In comparison, a Chip Eng Seng unit paid $760 psf for the land parcel of Grandeur Park Residences in February last year, and launched at $1,350 psf this year, posting a price differential of just 43 per cent.

Mr Lim Yew Soon, managing director of local developer EL Development, said developers in Singapore will have to “have a lower expectation of profit margins”.

“They will also have to be more thoughtful to create a more liveable environment for their future residents, as well as ensuring that their units are sellable.”

Mr Lim said that Singapore’s higher land prices are to be expected, and he expects both land prices and launch prices to climb.

Foreign developers often have extensive experience in their home markets and can spur higher standards here by introducing quality projects. Their willingness to accept lower profit margins could also spur local developers to explore avenues to increase productivity and become leaner and more efficient in the long term.


The vital question for home buyers is whether higher land prices will mean higher selling prices.

In the case of the Tanah Merah/Bedok area, it appears that higher land prices have compelled developers to take lower profits, while selling at fairly similar prices.

Analysts were uncertain about whether selling prices would necessarily go up.

There are three main factors which lead to higher selling prices – higher land prices and costs, market dynamics and location. Land price is just one of three factors that influence selling prices.

There are many other levers which developers can play with, such as managing costs and apartment sizes, he added.

Developers can edge up prices, but they know that affordability sells at the end of the day.

Chinese developers are able to manage costs much better, as they enjoy economies of scale when buying materials which local developers do not.

As developers’ aggressive bidding is a fairly recent phenomenon, and the projects in question have not been launched yet, it is still unclear how, and if, higher land prices will translate into higher selling prices for home buyers.

So far, a healthy level of competition has driven up land prices, likely eroding developers’ margins, and spurring more creative concepts.

Anecdotally, Qingjian and Fantasia Investment have been at the forefront in promoting smart-home features.

Foreign developers have certainly posed more challenges to local developers, it’s a more competitive playing field. Whether it’s level or not depends on whether local developers are willing to punch above their weight.

Adapted from: The Straits Times, 26 July 2017