Sunday, October 5, 2008

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Singapore Property Developers Gearing Rose Sharply in Q2 2008, Write-downs Loom

Big developers gearing rose to 52%, while small developers 242%

According to Credit Suisse, by Q2 2008, gearing for big-cap developers rose to 52%, while for smaller developers 242%. It reckons that small-cap developers could put added pressure on the property market due to their high gearing. Credit Suisse says, 'This reinforces our belief that small developers will drive the price cuts in the near future in the primary markets, especially in the prime and mid-high end, as some of them have acquired prime sites at peak price.'

Write-downs signal developers' acceptance of price falls

Credit Suisse expects writedowns by developers. CapitaLand, for instance, could write down as much as $200 million on its Farrer Court and Char Yong Gardens projects. This is based on an estimated breakeven price of $1429 psf and an estimated average selling price of $1280 psf for Farrer Court project. For Char Yong Gardens, the estimated breakeven figure is $2564 psf and the estimated average selling price $1960 psf. In 1998 when the property market crashed with the eruption of the Asian Financial Crisis, CapitaLand and Keppel Land wrote down between $900 million and $2.1 billion. Credit Suisse says they could 'do so again due to aggressive expansions and acquisitions, and substantial revaluation gains in recent years'.

In Credit Suisse's analysis, small-cap developers include Aspial, Koh Brothers, Heeton, Hiap Hoe, Ho Bee, Roxy, SC Global, Sim Lian, Sing Holdings, Soilbuild and Tee International.

For the full report, read: Write-downs could see property stocks slip further

May also want to read:
History of Singapore Property 1960 to 2008
HDB Resale flats Price Index 1990-2008: Graph & Chart
Your Property Investment Determines Your Financial Success in Your Life
HDB Resales: West Sees Highest Price Increase


Anonymous said...

Writedowns... visible demonstration that its a fallacy to believe that higher costs (whether from over-bidding for land or higher construction cost) necessarily leads to higher sale prices. Poor demand limits the price ceiling, and developers take the loss.

Anonymous said...

It started with the developers wanting to squeeze the home buyers. They succeeded. The home buyers are now mostly squeezed out of the private property market. They've gone for HDB flats instead. Now there are no buyers left for them.

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