Golf time between developers results in lower land bids: study

Winning bids fall by as much as 14% after informal interactions at the golf course.

It seems that downtime at the golf club is more than just for leisure, after a new study by NUS Business School revealed that top executives from development firms use their interactions in playing golf to acquire information for land bids.

The number of golf activities between executives increases upon the government’s announcement of a land sale, which results in winning bids that are 14% lower after such interactions, said the study.

After land sales are announced, developers up the frequency of golf games with other developers by 14% in the first week and 24% in the second week relative to the week before such announcements.

The study noted that whilst informal interactions allow developers to sell new units 8% cheaper, this spells bad news for the government due to lower land sale revenues.

The lower bid prices translate to losses in land sale revenue of more than $147m per year between November 2010 to May 2014. This corresponds to about 0.2% of the government revenues and about one percent of the total land sale proceeds on average.

Lower land transactions by informed bidders also generate short-term negative spill-overs to other properties in the vicinity, noted the study. The prices of neighbouring projects are about 9.9% lower within 30 days after the land auction results are publicised, with the decrease in prices lasting for no more than 90 days.