There were two good property reads this week. One was a perceptive commentary which had “ghost towns” in its headline but it was not images of vacant HDB flats that came to my mind. But more of that later as I first need to lay the foundation for that story with the other, which should then lead us nicely to my comment on ghost towns.
The focus of this other news analysis was on the winning margins of tenders for state land. Two state land parcels with residential components have so far this year already fetched winning margins exceeding S$100 million. Are there more to come? There was only one such case for the whole of last year.
Whether by coincidence or not, these huge winning margins were achieved shortly after the announcement of cooling measures mid-January.
Market watchers say this was due to a bigger divergence of views among developers on the impact of the measures.
I am not too sure about this analysis but I am pretty certain that developers do not bid according to their views of what they feel is a reasonable value for the site given the cooling measures.
When they bid, it is to win and so it has to be above this figure. The difference is the element of risk that the developer undertakes. When the developer gets it right, the rewards are great. Continue reading
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