Sunday, June 15, 2008

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Credit Crunch - Inflation: Rising Cost of Borrowing for Developers

Developers holding back launches since 3Q07 but smaller developers who yet to secure funding will face increasing pressure ....

Developers have remained cautious with new launches as evident in the sharp decline in the quarterly new launches from the high of 4,362 units in 2Q07 to 1,343 units in 1Q08 and many are reportedly holding back their launches due to the weak market sentiments. While bigger developers with strong balance sheet have the capacity to hold back their launches, smaller developers with high gearing may face pressure to launch their projects in a depressed market as a result of their high borrowings. And with cost of debt rising due to the credit crunch and inflation, these small developers may face increasing difficulties in securing credit lines. As such, we are cautious on small developers that had acquired land banks at high prices in 2007 and have yet to secure funding for their projects. - OCBC Investment Research Report -Jun 2008

May also want to read:
History of Singapore Property 1960 to 2008
Buy or Not Buy: How to decide amid mixed market signals
Smart Buyers, 10 reasons to wait
Property Price Index Graph Plotter & Online Property Valuation


Smart Property Buyer said...

I'd interpret this as smaller developers will lead the way to a property price moderation. We're already beginning to see this as smaller developers advertised their properties with less than $500 psf. It seems to me that developers recognise that this is the price level that will see buyers back in the market place.

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