Singapore's no. 2 property developer, City Developments Company (CDL) has remarked that prime land prices are at astronomical levels. CDL has a radical prediction where land prices will go up further to new all-time highs on a per square foot basis in the coming years. Singapore has very little prime land left for development and property development business has been getting tougher due to land scarcity. CDL noted that lands that are up for sale come with premium prices which will eat into profit margins. CDL recently acquired a 170,000 square feet land site for its latest Gramercy Park property development project, right next to the vibrant shopping hub at Orchard Road.
Singapore's property prices for the residential segment has seen 10 straight quarters of decline following government's regulations to enforce property cooling measures ranging from higher stamp duty and higher income to debt repayment ratio. It is the government's intention to control housing price hikes and dampen buyer's enthusiasm. Even as prices fell, Singapore remained Asia's no. 2 most expensive residential market for house buyers. CDL, with controlling shareholder Kwek Leng Beng steering the company's operations, had been fortunate to acquire the freehold land site many years back, and has enabled it to price the houses up for sale at current prices, which is still profitable to the group. Home prices before the financial crisis and central bank quantitative easing measures were still affordable with many bidders vying a piece of the property development action.
Prices for residential property stocks will be priced at significantly higher levels, as per announced in CDL's quarterly results to the stock exchange. This is due to higher prices for prime land which will be on a steady uptrend for future years. For the Gramercy Park development, the group is channeling all marketing resources by launching overseas roadshows and organizing regional promotional campaigns. Feedback has been good so far with many interested parties sending in enquiries for pricing and booking details. CDL was the highest bidder back in 2006 and managed to secure the Gramercy Park land site located at Grange Road. The total acquisition price turned out to be S$383 million. Singapore ranks just behind Hong Kong with the most pricey luxury home prices, as per a wealth report produced by Knight Frank, a leading real estate agent group in 2016. Singapore's luxury homes are truly catered to the very high net worth individuals.
CDL 31 March quarterly financials were lackluster, having announced a 14% fall in profits to $105 million. Revenue also fell by 11% to $723 million. The property market has been tough since the implementation of government cooling measures and weak results with negative growth is largely expected by property analysts and investors. For the coming quarters, imminent recovery is not expected to happen and property developers are bracing for tougher times ahead with the main objective of keeping extra reserves on the bank and slowing down property launches.
Government will maintain its government property cooling regulations in order to rein in property market from overheating. Mr Swee Kiat Heng, Singapore's Finance Minister made an official statement on 24 of March that property curbs are here to stay for the time being. This statement reinforced the view of Minister for National Development Mr. Lawrence Wong.
Some of the cooling measures being enforced is capping debt repayment ratio at 60% of loan borrower's monthly net income. Another measure was imposing higher stamp duty on the price of home purchase transactions. This comes on the back of low interest rate environment and strong foreigner demand for local houses which spurred the extraordinary capital gains for house prices.