Asian property research and analysis, DimSum Property

Kang Ho Chong

Asian property research and analysis

DimSum Property

Established in Singapore, DimSum Property is a private fund-raising platform with an investment focus across the entire real estate value chain, designed to connect real estate players to investors, built on proprietary and well-researched content, and driven by fin-tech innovations.

Our research articles are written by the DimSum Property Research Team led by co-founder Kang-Ho Chong.

Thematic (Sector/Industry)

Philippines Real estate / Thematic (Sector/Industry)

Mori Hills REIT Investment Corporation (3234 JP)

Bid to win, or bid to try your luck...Developers often enter into land bids with different strategies. They may aggressively “bid to win”, especially when their landbank has been depleted. Other times, they may choose to bid low, just to try their luck, hoping that no one else bids above them. Very often, these strategies will lead to different outcomes for their profit margins.<ul><li>Land is the most basic and important ingredient in a development project. In Asia, as land that is zoned for property development becomes more scarce, we see developers competing more and more aggressively for  land parcels, hence driving up land prices.</li><li>Given its relatively transparent and public data-rich land bidding system, we have chosen the Singapore land market as a case study to analyse and understand developers’ behaviours when they bid for land.  </li><li>Our model (between 2007-2016) suggests that since 2016, developers operating in Singapore have been finding it hard to win land parcels, due to greater competition for land. Combined with the pressing need to replenish their depleting landbank, many developers strategized to go all out to win in their land bids.</li><li>These aggressive bids have led to higher land costs and lower profit margins for developers, especially in an environment of falling home prices. We estimate net margins fell to ~15% in 2015, down from 22-36% in 2009-12. We expect them to continue lowering to single digits in 2016-17E.</li><li>Even in the face of a potential margin squeeze, many developers are still jumping in to bid for land, as they seek to fulfil “non-profit driven” strategies such as the need to restock, deploy cash, gain market share, or protect the value of a nearby land which they previously acquired.</li></ul>

Bid to win, or bid to try your luck...Developers often enter into land bids with different strategies. They may aggressively “bid to win”, especially when their landbank has been depleted. Other times, they may choose to bid low, just to try their luck, hoping that no one else bids above them. Very often, these strategies will lead to different outcomes for their profit margins.Land is the most basic and important ingredient in a development project. In Asia, as land that is zoned for property development becomes more scarce, we see developers competing more and more aggressively for  land parcels, hence driving up land prices.Given its relatively transparent and public data-rich land bidding system, we have chosen the Singapore land market as a case study to analyse and understand developers’ behaviours when they bid for land.  Our model (between 2007-2016) suggests that since 2016, developers operating in Singapore have been finding it hard to win land parcels, due to greater competition for land. Combined with the pressing need to replenish their depleting landbank, many developers strategized to go all out to win in their land bids.These aggressive bids have led to higher land costs and lower profit margins for developers, especially in an environment of falling home prices. We estimate net margins fell to ~15% in 2015, down from 22-36% in 2009-12. We expect them to continue lowering to single digits in 2016-17E.Even in the face of a potential margin squeeze, many developers are still jumping in to bid for land, as they seek to fulfil “non-profit driven” strategies such as the need to restock, deploy cash, gain market share, or protect the value of a nearby land which they previously acquired.

Japan Metropolitan Fund Investment Corporation (8953 JP)

Japan Metropolitan Fund Investment Corporation

Sunway Real Estate Investment Trust (SREIT MK)

CPN Retail Growth Leasehold REIT (CPNREIT TB)

Industrial & Infrastructure Fund Investment (3249 JP)

Industrial & Infrastructure Fund Investment