Increasing land cost and how it affects the property market
Developers have to bid for a piece of land through the Government Land Sale (GLS) programme which happens twice a year. The Singapore Land Authority (SLA) will then open up the site for tender where interested developers can submit their bids. The developer with the highest bid will be awarded the site.
Once the developer has been awarded the site, they would need to conduct a feasibility study to determine the project’s viability. This involves assessing the costs and timeline associated with the development. The amount the developer paid for is also a determining factor of how the developer will price the project for sale after it is completed.
Let’s take a look to see how we can use GLS to determine if a project is safe to enter. For this example, we will be using The Botany at Dairy Farm as a case study.
Take a look at the Master Plan in the area surrounding The Botany. There are seven plots of land around that have yet to be sold. How does that affect the future prices at The Botany? As land cost continues to increase, it will likely elevate the future price at The Botany – also commonly known as the first-mover advantage.
Let’s take a look at similar examples of the first-mover advantage.
For West Coast Vale GLS, we can see evidence of a rise in the price of land cost through the years.
How has this helped the residents of Parc Riviera?
As new projects get launched and rising land cost, gradually over the years, it has helped to bump up the prices of Parc Riviera. Some Parc Riviera homeowners even made close to $400,000 in profit!
Let’s take a look at another example closer to The Botany at Dairy Farm.
Similar to the West Coast GLS, we can see that land cost is increasing for different developments. How has that helped first-movers like the owners who bought Tree House?
We see owners of Tree House reaping huge profits, with ones as staggering as $780,000!
Now, take a step back and look at The Botany at Dairy Farm, is there a potential upside from the seven plots of land that have yet to be sold?
Quite evidently, yes. There is a first-mover advantage potential as it’s land cost is the lowest compared to future new launches.
Land cost of Treasure at Tampines in 2017 and
Land cost of Lakeside apartment in 2022.
(see chart below)
The Land Cost Price almost DOUBLE in 5 years!
=> Unit Price PSF almost DOUBLE as well!!
Based on the above charts, prices of new launches across all regions have increased significantly since 2007 till date.
Is there still Opportunity in the property market? How do I look for an opportunity? What should I be looking out for?
Here is a pipeline of new launches in 2023! Let’s determine your needs and we will be delighted to share and identify with you the projects that might suit your requirement for FREE!
Read more: How does supply and demand affect property prices? Property highlight Tembusu Grand
