Landbanks 'healthy' despite strong sales

Landbanks 'healthy' despite strong sales

The bumper supply ramp-up of new land sites has allowed developers to keep their landbanks stocked up in the face of roaring home sales.
Most big-gun builders have thousands of units in their landbanks. A landbank comprises unsold units - including executive condominiums - from projects with planning approval and estimated units from sites that have yet to obtain approval.

City Developments and its parent company Hong Leong Group have the biggest stock with 6,053 homes - made up of land parcels in Pasir Ris and projects like Bartley Residences and Hedges Park that are being built. Next is privately held Far East Organization with 2,592 units.

Most other major developers are far behind. Frasers Centrepoint, Allgreen Properties, CapitaLand and Keppel Land have fewer than 2,000 units each in their landbanks while UOL Group, GuocoLand and Wheelock Properties have fewer than 1,000 homes each.

Most of CapitaLand's stock comes from d'Leedon in Leedon Heights with 1,255 unsold and unbuilt units and its upcoming Sky Habitat in Bishan with 509 units. This project has yet to be launched.

Allgreen acquired a site in Upper Serangoon that can yield about 860 homes last September on top of its upcoming projects RV Residences and Riverbay.

The landbank Top 10 list includes some new foreign players that have moved into the local market on the back of bumper government land sales (GLS).

Chinese firm Qingjian Realty is at No. 9, followed by Malaysian-based IOI Corp at No.10. Another Chinese firm MCC Land is at No. 12.

Some of these foreign developers started out as construction companies and, seeing the good sales and profit margins to be made, it is a natural step for them to become developers. Others are also diversifying out of their own countries.

Those sales have helped prevent landbanks from being depleted despite the record number of more than 32,300 new homes sold in the past two years.

The strong market has also kept competition keen as more developers battle over land. Small to mid-sized local players also made the list. Sim Lian Group is in sixth place with a landbank of 1,550 units, double its level from a similar study two years ago.

The definition of 'a healthy landbank' varies according to the size and business model of the developer.

For instance, higher-end developers like Wing Tai and SC Global might not be keen to replenish their landbanks, given that sales in the prime segment are still slow.

Some developers aim to be the top few developers, so they have a larger landbank which they continually build up through (government land sales) and private purchases.

Developers with a smaller team and funds will have a lower landbank so that they can be more focused on one or two projects each time.

Having a large landbank is a double-edged sword. It could be a boon if the market is up but a bane if it turns. Developers like Far East and Frasers have also been turning round their sites very quickly. Despite buying many GLS plots, rapid project launches have meant their landbanks are lower than expected.

Roxy-Pacific executive chairman and chief executive Teo Hong Lim acknowledged that the competition for land has increased in the past two years with more players entering the market.
Home owners also raised their asking prices for collective sales, resulting in higher land costs. 'We've sold quite a lot of units and will have to keep replenishing our landbank... But it's not just about securing land for the sake of doing so; you have to ensure that it's at the right price and right timing,' he said.

Source: The Straits Times – 8 March 2012