What would happen to new launch prices in 2017?

In this Insights, I will share with you my thoughts on New Launch Prices in 2017.

This is a Insights sent by New Launch Guru on 10 Dec 2016. Re-posted.
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Recent government land sales

Just after I came back from Taiwan trip, a government land sales news caught my eyes.

“A residential site in Margaret Drive drew bullish bids from 14 developers eager to replenish their land supply in the last Government Land Sales (GLS) tender for the year. It lodged $238.39 million, or $997.85 per sq ft per plot ratio (psf ppr).”

The 14 offers for the Margaret Drive site followed strong bidding at two previous residential tenders – a Martin Place site drew 13 bids, while a Fernvale Road plot attracted 14.

Hungry for land?

If you have been following the latest government land sales, you would realise developers have become very hungry for land lately. Why? Many record bidding prices have been created in 2H 2016. The confident bidding could also suggest that bidders are optimistic about the market outlook.(see below table)

new launch prices

Margaret road top bid $998 is 22% higher than Prince Charles Crescent land bid in 2014, now named Principal Garden. The project has been well received by the buyers due to its attractive price, lush landscaping, and beautiful architecture design. Fernvale Road site was sold in Sep at $517, which was around 18% premium to High Park Residences bid in 2014. And the project, by now, left the last 9 units to be 100% sold out.

My View

Coming to 2017, when all these sites are going to be launched for sale, there could only be two outcomes for new launch prices. Either the projects are to be priced 15-20% higher than the current projects to cover the high land cost, or developer has to shrink unit size by the same percentage to maintain its affordability to buyers. However, both options do not appear to be good news for potential buyers.

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