Competition increases land cost, but it increases the development productivity, and thus lower construction cost.
One of the observed differences between the local developer and the international developer, is their scaffold method.
The local developer's scaffold "grow" together with the building under-construction. It is dismantled manually floor by floor once done. It is a typical method used locally, if my observation is right.
The international developer's scaffold covers only three floors, and it "climbs" along with the building under-construction. The scaffold disappear once the building structure is done.
By common sense of a layman, the cost of the latter should be lower than the former, with lesser material and manpower used.
In China where the land cost is the most expensive factor in property development, the leading developers are earning an average of about 16-17% net profit margin. The smaller developers are earning much lower than that. To the smaller Chinese developers, it's not uncommon for them to compete in a market that can still give them only 10% profit margin. That's why you see a lot of smaller developers blowing up in 2010 when banks tightened their credit. They are big risk takers.
(22-02-2014, 04:42 PM)freedom Wrote: [ -> ] (22-02-2014, 02:56 PM)kichialo Wrote: [ -> ] (22-02-2014, 10:56 AM)freedom Wrote: [ -> ]Have you considered the risk that the foreign developers could just go away when there is not going to be enough profit and even the properties are just half way? Who is going to clean up the mess?
If I extend your thinking a bit further, subprime was the best economy model because the poor also could get a cheap loan and a house. Do you agree?
what happen to free market and competition? If they cannot compete and fail, so be it. No one should become too big to fail, and definitely get no bail out.
No one is saying anything about no free market or competition. Local market does have competition. And if you think the return is good enough, why don't you start a property development company and compete with existing players? No one has stopped you from doing it.
This is not about too big to fail, but orderly market. Being cheap does not necessarily make everything better. As I said earlier, subprime offered cheap credit, everybody knows what happened thereafter.
Or putting it in another way, are you enjoying the cheap labor the government has imported? Every coin has two sides.
Your reply reminds me of Goh CT challenging Chiam ST to build a HDB flat because the latter say HDB earns high margins. Sounds reasonable but utter nonsense. It's like me saying those without accounts or finance background shouldn't be allowed to talk investment since they never do the stuff before
As per Tiggerbee, the margins for Koreans who build and develop chemical plants to nuclear plants are about 5-10%
With higher margin the number of developers will be enticed to come in, that is true. However the supply of raw material is scarce ie land. So that's where a single faceted analysis is flawed again ie more developers competiting does not mean prices will come down. The correct logic should be to reduce the margins of developers so that demand for the major raw material goes down, and discourage more entrants.
Land is relatively inelastic in the long term which many people has pointed out as the perpetual long term positive for Singapore land scarce property market.
(22-02-2014, 11:16 AM)freedom Wrote: [ -> ]Not exactly. The poor have nothing in the beginning and have nothing in the end. They have lost almost nothing. What subprime really hurt are those who really have the means to buy a properties but paid a dear price because subprime created too much non-existing demand.
Sub-prime means those who couldn't afford to buy were being lent money to buy. I don't think we take consolation in people having zero remaining as zero. It defies the way modern society progress... more like medieval ideology
(24-02-2014, 12:37 PM)specuvestor Wrote: [ -> ] (22-02-2014, 04:42 PM)freedom Wrote: [ -> ]No one is saying anything about no free market or competition. Local market does have competition. And if you think the return is good enough, why don't you start a property development company and compete with existing players? No one has stopped you from doing it.
This is not about too big to fail, but orderly market. Being cheap does not necessarily make everything better. As I said earlier, subprime offered cheap credit, everybody knows what happened thereafter.
Or putting it in another way, are you enjoying the cheap labor the government has imported? Every coin has two sides.
Your reply reminds me of Goh CT challenging Chiam ST to build a HDB flat because the latter say HDB earns high margins. Sounds reasonable but utter nonsense. It's like me saying those without accounts or finance background shouldn't be allowed to talk investment since they never do the stuff before
As per Tiggerbee, the margins for Koreans who build and develop chemical plants to nuclear plants are about 5-10%
With higher margin the number of developers will be enticed to come in, that is true. However the supply of raw material is scarce ie land. So that's where a single faceted analysis is flawed again ie more developers competiting does not mean prices will come down. The correct logic should be to reduce the margins of developers so that demand for the major raw material goes down, and discourage more entrants.
Land is relatively inelastic in the long term which many people has pointed out as the perpetual long term positive for Singapore land scarce property market.
Your argument have no resemblance to mine. Nothing I have said implied anything about not doing it because of never done it before. My argument is simply that if you think the margin is high, why don't you do it. The market reality that only a few development companies exist suggests that the margin is not high enough to entice other players to enter the market.
Land is out of the argument. No one is talking about absolute price, but the margin developers are earning.
Quote: (22-02-2014, 11:16 AM)freedom Wrote: [ -> ]Not exactly. The poor have nothing in the beginning and have nothing in the end. They have lost almost nothing. What subprime really hurt are those who really have the means to buy a properties but paid a dear price because subprime created too much non-existing demand.
Sub-prime means those who couldn't afford to buy were being lent money to buy. I don't think we take consolation in people having zero remaining as zero. It defies the way modern society progress... more like medieval ideology
I have no intention to extend any further discussion with you about your populist ideology. Please leave me out of it. Thanks.
MCL Land tops bids for Choa Chu Kang EC sites - ST by Melissa Tan
The 2 parcels at CCK were the first EC sites offered to developers since new rules on EC loans were imposed in Dec 2013. *** MSR@30% + Resale Levy
JL LaSalle Singapore research head Ong Teck Hui said,
"they could be almalgamated as one integrated development...
achieving an overall average price that is better off than if the sites were individually developed".
ERA KEO Eugene Lim said MCL could also opt to launch the two sites separately "for more exclusivity".
Love Compassion
A Life not Reflected is a Life not Worth Living.
(26-02-2014, 09:38 AM)chialc88 Wrote: [ -> ]MCL Land tops bids for Choa Chu Kang EC sites - ST by Melissa Tan
The 2 parcels at CCK were the first EC sites offered to developers since new rules on EC loans were imposed in Dec 2013. *** MSR@30% + Resale Levy
JL LaSalle Singapore research head Ong Teck Hui said,
"they could be almalgamated as one integrated development...
achieving an overall average price that is better off than if the sites were individually developed".
ERA KEO Eugene Lim said MCL could also opt to launch the two sites separately "for more exclusivity".
Love Compassion
A Life not Reflected is a Life not Worth Living.
I recalled that MCL Land paid too much for the Estuary plot before the GFC and had to make write down the value of that land plot there after..