Published 2 March 2011
The Business Times
By Uma Shankari
Some projects turned around just 5 months after site purchase to profit from market momentum
Developers are fast-tracking residential property launches, with some rolling out projects just five months after buying a site.
But with looming property market uncertainty, developers seem to feel that it is better to take a bet on prices sooner.
Data compiled by CB Richard Ellis (CBRE) shows that of the 11 government land sites bought in 2010 and launched since, 10 were rolled out within eight months of being purchased.
In fact, two developments – Fragrance Group’s Kovan Grandeur and the Prive executive condominium from NTUC Choice Homes Co-operative and Chip Eng Seng – had a turnaround time of just five months.
The same trend could also be seen for sites sold by the government in 2009. The five sites that have been launched were all rolled out within 6-11 months.
By contrast, sites purchased from the government land sales programme in 2006 and 2007 were mostly launched at least a year after they were acquired. The longest turnaround time was 44 months for City Developments’ The Residences at W Singapore Sentosa Cove.
‘In the past two years, we have observed that the turnaround time for projects has been reduced to less than 12 months,’ said Joseph Tan, CBRE’s executive director for residential. Developers want to catch the momentum of the market when demand is strong, he said.
CityDev said that in today’s market, it is ‘not uncommon’ for developers to turn around their acquired sites within 9-12 months for launch, depending on the scale and complexity of the projects.
‘As with industry practice, detailed planning and preparations to have our projects launch-ready commence soon after the sites are acquired,’ said a City- Dev spokeswoman. But the group, which has always maintained a strong land bank position, believes in maximising value from its development sites and will time launches in line with buyer appetite, she added.
Developers BT spoke to said they now push out projects much faster than they used to a few years ago in order to make sure that they can book a reasonable profit before market sentiment changes.
‘Definitely, as a developer, we try to get our projects launch-ready as soon as possible,’ said Liam Wee Sin, UOL Group president (property).
Mr Liam explained that in the past, property market cycles lasted for years. But now, developers have to work to catch a suitable ‘window’ as the market can change very quickly.
‘Developers look for periods, or windows, to launch their projects. They want to catch this window and cater to homebuyer demand when it is strong,’ he said.
UOL won the site for Waterbank at Dakota Crescent in September 2009 and pushed it out within six months in March 2010.
In addition, a project sometimes has to be launched quickly so that a developer can gain a first-mover advantage in an area, Mr Liam added. This is especially so in suburban locations, where the government could release more land to cater to strong demand for private homes.
Once projects are launch-ready, developers can then decide to release units in phases if there is a chance of a price upside, Mr Liam said.
Roxy-Pacific chief executive Teo Hong Lim similarly said that after developers acquire sites, they would want to launch them before market conditions change.
When a developer bids for a site, certain assumptions are made about the price that upcoming homes can sell for and the construction cost. Launching a project quickly allows a developer to ‘lock in’ both unit prices and construction cost, Mr Teo said.
The shorter turnaround time has also affected how property groups here plan their residential projects.
Now, most companies begin work on the detailed design and technical building requirements immediately after winning a site. And some developers even begin the preliminary design work for a site before bidding for it, industry players said.