Buying land in Singapore at current high prices would be ‘suicidal’ given the government’s requirement that new homes must be sold within two years of completion, City Developments Ltd chairman Kwek Leng Beng said.
Developers of land for high-end residential projects are subject to conditions of a so-called qualifying certificate, which includes the two-year deadline, according to the city-state’s rules. Developers can apply for an extension after paying a fee.
“With these qualifying certificates, it will be suicidal to keep buying land at high prices just because we want a land bank,” Kwek said at a press conference in Singapore. He forecasts Singapore’s private home prices will decline as much as five per cent over the next year due to the government’s property curbs.
The billionaire chairman of Singapore’s second-biggest developer is bracing for ‘stronger headwinds’ after record home prices amid low interest rates raised concerns of a housing bubble, prompting the government to widen a four-year campaign in January to curb speculation in Asia’s second-most expensive housing market.
The government increased stamp duties for home buyers by five percentage points to seven percentage points in January and set loan limits in June.
“The global economy remains fragile and unpredictable,” Kwek said in a statement. “Domestically, with the latest round of property cooling measures which has been the most effective to date, the group expects stronger headwinds in the second half.”
Profit Rises
City Developments also said second-quarter profit rose 48 percent on asset sales and property development. Net income climbed to S$203.8 million (US$161 million) in the three months ended June 30, from S$137.7 million a year earlier, it said in a Singapore exchange statement.
Sales gained 1.8 per cent to S$801.6 million.
Profits were boosted by the sale of an industrial site at 100G Pasir Panjang in the quarter ended June, the company said. The property development segment was the second-highest contributor, adding 23 per cent to pretax profit, according to the statement.
Over-Leveraged Buyers
The central bank estimates that between five per cent and 10 per cent of borrowers have probably over-leveraged on their property purchases with total debt service payment at more than 60 per cent of their income, Monetary Authority of Singapore’s managing director Ravi Menon said on July 23. Low interest rates, growing leverage, and surging property prices pose significant risks to financial stability, he said.
The volume of private residential sales is more measured and prices are expected to moderate in the mass market segment, due to a tightening of bank borrowings, the company said in the statement.
The group started offering homes at the 616-unit Jewel @ Buangkok in June, selling 203 of 280 apartments released during its first weekend preview, the developer said.
Its D’Nest project, a 912-unit joint venture condominium located at Pasir Ris Grove, has been 91 per cent sold, while Bartley Ridge, a 868-home joint development it started marketing in end-March, has sold more than 75 per cent of the project, the company said. — Bloomberg