Did China Developer Bids Push Up Property Prices?

Hong Kong and China developers are no longer the most aggressive bidders in land tenders in Singapore nowadays.

Though still active, they have not been topping the bidding lists for private housing collective sales sites and state land sales, since the beginning of last year.

According to property analysts, there are a few reasons for this less aggressive stance. One main one is that they have built up a landbank from the many en bloc deals done before the cooling measures last year. And one of the cooling measures, namely the ABSD (Additional Buyer’s Stamp Duty) has further dampened sentiment among developers. So the focus for the time being is on clearing current inventory.

Based on studies done by property consultant Cushman & Wakefield, the ratio of public and private land tenders sealed by Hong Kong and China developers has fallen from 16.7% in the first half of 2018 when they clinched eight sites, to 11.1% in the 2nd half of 2018 when they managed to get only one.

In the first six months of 2019, Hong Kong and China developers did not land any sites. By contrast, local and other foreign developers (including Malaysian ones) secured five deals in the first half of 2019.


Expectations Going Forwards

Going forwards, Ms Christine Li, Cushman & Wakefield’s head of research for Singapore & South-east Asia, is of the view that China developers will continue to take a more muted approach for the time being, in bids for GLS (Government Land Sales) sites.

She observed that, “The Chinese economy is headed for a potential hard-landing arising from the prolonged trade and technology tensions with the US and that does not bode well for business sentiments.”

And hence, ”The imposition of additional buyer’s stamp duty (ABSD) in the latest round of cooling measures in Singapore has also made residential development more challenging. In the current climate, the focus for Chinese developers could be on clearing existing launches in the short to medium term.”

However she expects China developers to continue to compete aggressively for projects where they expect continued demand, such as in the executive condominium sector.

This is borne out by the fact that MCC Land clinched an EC site at Canberra Link in Sembawang with a winning bid of SGD$233.89 million, in July this year (which is being developed into Provence Residence EC.)

On the other hand, it is not for certain that the more low-key stance currently adopted by China developers is making it easier for other developers, as they are all taking a more wary approach in the wake of the latest round of cooling measures.

However Mr Lee Nai Jia, the head of research at Knight Frank, feels that certain sites could still see keen competition. He pointed to the upcoming state tenders for the One Bernam and Tan Quee Lan Street sites as being the ones to watch. (Editors’ Note: Interestingly enough, these were eventually won by Hao Yuan and Guocoland, and named One Bernam and Midtown Modern respectively.)


Participation Rates in GLS Tenders

Hong Kong and China developers do continue to take part in GLS site tenders. A study by Jones Lang Lasalle (JLL) shows their participation rate at 23% in the first half of 2018, 34% in the 2nd half of 2018, and 29% in the first half of 2019.

Mr Ong Teck Hui, JLL’s senior director for research and consultancy, figured that their lower rate of GLS participation in the first half of 2018 was because they were more active then in the collective sales en bloc segment, before cooling measures were imposed.

He observed that subsequently, “After the cooling measures, en bloc owners’ price expectations remained high while developers turned cautious, making it very difficult for them to secure such sites. This probably resulted in Chinese and Hong Kong developers participating more actively in GLS tenders in 2H18 and 1H19, compared with 1H18.”

Industry players say that China developers were in fact swifter to read the market, and moved to bid decisively when the market corrected from 2014 to 2016. So they were ahead of other developers when the market recovered.

Among the bunch of collective en bloc sale sites that they scooped were some big ones. Most notable was probably Normanton Park, that went to Kingsford Huray Development in 2017, for SGD$830.1 million. (Editor’s Note: Though later Kingsford was issued a no-sale notice for Normanton Park, and was eventually only allowed to proceed to market it at end 2020.)

Others were Shunfu Ville, won by Qingjian Realty in 2016 at SGD$638 million, and a Stirling Road GLS land parcel that went to Logan Property and Nanshan Group of China in 2017 for around S$1 billion. Logan Property also picked up the privatised HUDC estate, Florence Regency, at SGD$629 million.

Then came the cooling measures in July 2018, that saw lower loan-to-value limits and higher ABSD charges on residential property purchases. Following those measures and a slowing market, developers became more cautious in their land bids.

Mr Nicholas Mak, ERA Realty’s head of research and consultancy, is of the view that developers in Singapore would want to sell a large part of their current project inventory before trying to acquire more land, as they expect the cooling measures to moderate demand further.

For another take on this topic, read this article on whether aggressive bidding by Chinese developers could have pushed up Singapore property prices.

Source: The Business Times . 26 July 2019