CDL not looking to overpay in land tenders

Singapore’s second-largest developer City Developments (CDL) said it is not looking to put in top-dollar bids on land tenders just to grow its land bank in Singapore. This is due to the so-called “qualifying certificate”, which requires developers of high-end residential projects to sell their new homes within two years.

CDL’s Executive Chairman Kwek Leng Beng said: “It will be suicidal to keep on tendering land at high prices and you know (it is) just because you want land bank. It’s not the policy of our company to keep tendering land at the high prices.”

Instead, Mr Kwek said the developer will continue looking outside of Singapore, including London, China and even Myanmar.

CDL released its second quarter financials on Tuesday.

Its net profit jumped 48 per cent on year to S$203.8 million, mostly off the sale of an industrial site at 100G Pasir Panjang, a subsidiary in China and property development, which contributed 23 per cent to pretax profit.

Analysts agree with CDL that the Singapore property market may face stronger headwinds in the second half of the year.

Chok Wai Lee, senior equity analyst at S&P Capital IQ, said: “Our house view is actually that the property price in 2013 will correct by 1 to 5 per cent. The government is monitoring the condition closely and given that housing for a lot of Singaporeans is actually a retirement asset, I think the government will actually lift some of the measures if it thinks the conditions actually warrant some changes.”

Meanwhile, CDL’s hotel unit – Millennium and Copthorne Hotels (M&C) – saw Q2 net profit fall 17.7 per cent on-year to £33.1 million, from £40.2 million in Q2 2012.

This was due to an ongoing refurbishment programme and competition in the hotel sector.

Regina Lim, head of Singapore Equity Research and ASEAN Property Research at Standard Chartered, said: “About 7 per cent more hotel rooms will be built this year, compared to what is existing. And unless we have tourist arrivals rising over 7 per cent, the likelihood is that the revenue per room will fall and we’ve seen in the first half that the revenue per hotel room has fallen about 5 to 8 per cent year-on-year.”

But with hotel supply on the lower side for next year, experts expect room rates to bottom out by the end of 2013 and perhaps improve in 2014.

Source : Channel NewsAsia – 6 Aug 2013

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