The spate of aggressive land bids in recent months has prompted even the president of the Real Estate Developers' Association of Singapore to sound an alarm this week. Mr Augustine Tan believes these record-setting bids are not sustainable, as cooling measures are still in place and Singapore's population growth remains slow amid manpower curbs.
But the reality is that developers are land-starved and need to replenish their dwindling stocks to sustain business. The cutback in the number of sites in the Government Land Sales programme in the past few years has forced real estate developers to turn to collective sales to build their pipeline of projects.
The $906.7 million paid for the District 15 condominium Amber Park by a joint venture between units of City Developments (CDL) and Hong Leong Group is the highest price achieved for a freehold site in a collective sale.
The bid would translate to selling prices of between $2,200 and $2,600 per sq ft (psf) for the proposed 800-unit luxury condo to be built on the site, analysts say. These prices are well above prevailing values of around $1,700 to $1,800 psf at the new developments Amber Skye and Marine Blue nearby, although analysts note that their locations are not as attractive as Amber Park's.
Some believe there are still margins to be made, given recovering home prices. To many observers, the CDL buy was aggressive but made sense, in the light of a competitive landbanking environment and a paucity of choice freehold sites.
"The optimism is there, but we are not saying that prices will jump 10 per cent to 15 per cent just because the land sales were done at record-high prices," said Mr Tan Hong Boon, regional director of JLL, which marketed Amber Park.
"On a quarter-to-quarter basis, a 0.5 per cent to 1 per cent increase may still be bearable."
There is a real fear that aggressive land bids could translate into higher home prices, but it is too early to tell, as factors like rising interest rates are also in play.
But this situation bears close watching by the authorities.