Developers mull over replenishing land banks

As of 1H16, unsold inventories stand at 21,500.

Despite the muted outlook in the residential market, domestic developers are keen to reload their land banks as they sit on fairly lean unsold inventories.

According to OCBC Investment Research analyst Eli Lee, the national aggregate of unsold inventories held by developers stands at 21,500 units - way below the 10-year average of 33,500 units.

"In particular, there is firm demand for mass-market sites on which projects with carefully
calibrated prices can still sell briskly," Lee noted.

The analyst said the aggressive bids for the Fernvale site, for instance, point to the fact that developers continued to have significant cash reserves at their disposal given their generally firm balance sheets and fluid access to capital with low interest rates.

However, for such sites awarded under under the Government Land Sales (GLS) tender, Lee stated that the dilemma “between having capital headroom sit idle and taking a new condo project in an uncertain residential market is an uneasy one for developers.”

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