The second-largest Singapore developer has described the prime land prices as ‘exorbitant’ and predicted that in years to come they will only become more expensive.
In its earnings statement made on Wed, May 11, City Developments (CDL) said that in Singapore, which is land-scarce, it is more and more difficult to secure prime land of that scale and if it is available, the asking price is exorbitant. These comments were referring to the 16,000 sq m or 17000 sq ft site that CDL bought for the Gramercy Park project off Orchard Road shopping belt.
While the prices of residential property in Singapore have been on decline for ten quarters after the government imposed curbs in 2009 to reduce buyers’ enthusiasm, the country’s housing market is the second-most expensive in Asia.
In the statement, CDL, which billionaire Kwek Leng Beng runs, said that luckily it had secured the site for the freehold Gramercy Park in previous years, which made it possible for it to be offered at the current rates.
The company in the results statement added “Future stock in this area is expected to be priced higher” referring to the prices of prime land. The statement also said that the group is having overseas roadshows to promote Gramercy Park and it has received positive interest.
CDL had placed the highest bid for the Gramercy Park plot at S$ 383 million in 2006. The developer profit for the quarter ended March 31 was S$ 105.3 million, a 14% decline while revenue had 11% decline to S$ 723.3 million.
The government has been reluctant to remove the cooling measures in the property market for fear of another overheating. In the March 24 budget speech, Finance Minister Heng Swee Keat said that relaxing the curbs was “premature”. This was in reiteration to the view expressed by National Development Minister Lawrence Wong in February.
The curbs include a debt repayment cost cap at 60% of the borrower’s monthly earnings and higher stamp duties on home purchases. These were set after demand from foreign buyers and low interest rates raised concerns of prices rising too far and too fast.