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Saturday, 12 August 2017

Local developer's hope or dream

All signs point to a potential recovery in the property market even when the slew of cooling measures have not been lifted. However, one rule, Qualifying Certificate in particular that was in place to "By limiting foreign companies' holding period, the QC scheme was meant to prevent them from hoarding land or buying land for speculation in Singapore". Basically the developers had 5 years to build and 2 years to sell all to avoid any penalties.

However, this does not seem to deter them from aggressively biding for land recently. They do not mind bidding ahead of fundamentals, i.e. "They may bid at zero margins but by the time they launch it, they make a handsome profit out of it." In order words, they must be pretty confident they can sell them all and well.

Thus it is kind of strange when Mr Kwek raised the concern about the QC scheme. "..."Such penalties are heavy and erode all profit. I hope the Government reviews them again to steady the rate of growth in terms of price increase." What he did raise rightly was the aggressive nature of foreign developers risk pricing the locals out of the market. "If not, you can see every bid (for land) now is higher and higher than ever. Land is akin to raw material for a factory, and if we don't have that, the factory will be doing nothing. Therefore, there's no choice but to bid for the land. If you put in a cheaper bid because you think it's the right price, you'll get nothing." So its really up to the local developers to face up to the competition, wherever its coming from.



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