There are quite a few property developers in Singapore that anticipated the much-desired property market recovery, having a good level of activity in the past year so that they are ready when things start turning around. Now that it is happening, investors are looking for those developers that are capable of delivering according to their expectancies. In these conditions, how can a property developer ensure his success? He can do so with the help of solid sales of properties and higher prices for their units and, according to analysts, they will continue enjoying re-rating in the near future.
For quite a while, players in the property market of Singapore anticipated a turnaround of the market, some developers choosing to postpone the launches of their new properties until the coming of this moment. Thus, according to experts, the ones that will be ready to welcome these changes with brand new launches, more than needed to suit the requirements of growing market, will be the winners of the season, especially if they managed to secure the land for their property developments before the prices started going up. Mr Derek Tan, the DBS senior vice-president in charge of group equity research, believes that the stocks of developers will be subjected to increases ranging between 10 and 15%. According to what he says, developers that want to be successful in 2018 will have to deliver and meet the demands of the market, as the volume of transactions will continue to grow this year. This also means that the take-up rates for the new launch condos will be rather consistent.
At the same time, Mr Tan cautions everyone to be careful and not get swiped away by too much enthusiasm. While things may look great in the first 6 months of the year, as the demand for new homes will increase, there is quite a lot of uncertainty in the second half of 2018, as new projects that come after the acquiring land at prices that are higher than before will kick in. But, if everything goes well, then the prediction of Brandon Lee, a JPMorgan property analyst have high chances of coming true, as he said that in order for developers to obtain a pre-tax profit margin that ranges somewhere in the 5 to 10% are, then prices will have to increase between 6 and 13%, in the coming one or two year. This is something that could actually happen, having in mind the current trend of the market, if there won’t be anything to trouble this market growth.
Of course, the premiums estimated by analysts can vary, although there are some aspects that can be properly distinguished in these predictions. For example, the developers that succeeded in banking their land prior to the market’s recovery point, when the prices were much lower, enjoy the highest degree of safety. But, on the other hand, no one will guarantee that homebuyers will accept the increased prices for their units, which is an aspect that is still surrounded by uncertainty. Developers should not be too excited about much-improved profit margins, as banks started tightening a part of their packages for home loans, which mean that homebuyers won’t have the same purchasing power. So, while the change in the property market has been expected with enthusiasm, this process is still at its beginnings, which should make us cautious and tempered.
New launches that will be coming out in 2018
