It is a rare occasion when a billionaire property developer talks the market down. Kwek Leng Beng, Chairman of City Developments Limited (CDL), a leading real estate developer in Singapore, did just that recently when he called buying land in Singapore at today’s prices “suicidal” and predicated an up to 5 percent fall in property prices.
Buying land in Singapore at current prices “suicidal”
Not one to mince words, he called buying land from Government Land Sales “suicidal”, especially given the requirement that the units must be sold within two years of completion. His point was that it didn’t make sense to buy land at today’s high prices, and then give up the flexibility of being able to time the sale of the units, especially if the deadline to sell coincides with a downturn in the market. Developers, would in effect have to “buy high and sell low”, and potentially face reduced margins or even losses.
Land prices have shot up in recent months as developers continue to bid them up despite the seven rounds of cooling measures and the recent Monetary Authority of Singapore (MAS) guidelines on the Total Debt Servicing Ratio. Based on CBRE’s analysis of government land sites that have been recently sold, the majority of suburban projects are expected to launch units for sale at above $1,200 psf.
Kwek: Up to 5 percent fall in prices over the next year
And just to be clear, Kwek is looking for a correction in the private residential property market of up to 5 percent over the next year, assuming the government’s property cooling measures remain. He sees a combination of a fragile and unpredictable global economy and the combined impact of the multiple rounds of property cooling measures creating “stronger headwinds” for the market (and for property developers).
Read the rest of the article here: http://sg.news.yahoo.com/property-billionaire-turns-bearish-130126516.html