According to property experts, margin compression is no less than a threat to property developers in the country specially now that the Singaporean government is unlikely to release its cooling measures.
To CIMB, the price for private homes is expected to fall 5% this year (2014) because of the financing restrictions imposed on buyers, high supply of private properties and hazy expectations over property prices. Furthermore, CIMB predicts that the profits of local developers would not be in projection because of the weak selling price and high cost of land.
To PropNex, the decline is brought about by the decrease in sales for private homes. This decrease is primarily linked to the “holding back” attitude of buyers wherein they anticipate for a cheaper land price in the near future.
PropNex believes that the reduced transaction volume reflects the near-term market size and that they will remain in neutral at this point. This neutrality is caused by the impact of financing restrictions on marginal buyers.
On another point, local developers in Singapore are dealing with marginal compression at a weaker ASP and on a condition where land prices are at their highest. With such, some developers have expanded their market by venturing into other countries like UK and Australia. Some even furthered their income by investing on investment properties. These steps have enabled them to gain higher PBT margins of about 15-20% than 10% from projects made locally.