Singapore's shrinking landbanks could worsen, warns analyst

Inventory cycle to continue declining.

According to Macquarie Research, Singapore landbanks have shrunk, and will shrink further.

Based on its estimates, property developers purchased a total of 19 residential sites in 2013, which yielded a potential 7,588 units.

This represents a significant YoY decline of 46% from the 13,935 units in 2012, which was attributed to an inactive en bloc market and developers’ failure to trigger any sites from the GLSP’s Reserve List. As a result, GLSP sites comprised a bulk of total land tenders at 92%, a consistently upward trend since 2009’s 51%.

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In addition, developers’ quick asset turnover strategy in 2013 has led to diminishing inventories. According to our forecasts, average inventory cycle now stands at 2.9 years, compared to 3.6 years a year ago.

Over the past 7 years, the landbank-sales ratio has been coming in at 0.8x, which suggests developers have not been able to replenish adequately what they have sold. This could be due to a mix of better-than-expected homebuyer interest, as well as in anticipation of further cooling measures.

Going forward, we expect inventory cycle to continue declining.

Although developers’ low net gearing of 35% accords them plenty of debt headroom to replenish landbank, they will continue to face rising competition for land from non-traditional players. The potential price decline amidst an environment of slowing volumes will ensure they do not overbid.

The sustained tepidity in the en bloc market has not helped as well, as it remains the only alternative avenue of landbanking.