Hot sales at new condo launches can be too much of a good thing for developers

Hot sales at new condo launches can be too much of a good thing for developers

Increasing risks include fierce bidding for land and government action

Leslie Yee
The Business Times

Oct 20, 2025

https://www.businesstimes.com.sg/opi...ing-developers

The backdrop to the launch of the 666-unit Skye at Holland was the ratcheting up in US-China trade tensions.

However, Singapore’s condominium buyers appear immune to bad news. A media statement on Oct 11 from UOL Group and CapitaLand Development (CLD) noted that 658 units, or 99 per cent of inventory, were sold at the project’s launch at an average selling price of S$2,953 per square foot (psf). Almost all buyers were Singaporeans and permanent residents (PRs).

The 99 year-leasehold condominium in Holland Village is jointly developed by UOL, Singapore Land Group, CLD and Kheng Leong.

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Skye’s hot sales was nearly matched by subsequent launches of Penrith, a Queenstown area project, which sold 447 units or 97 per cent of its 462 units at an average of about S$2,800 psf; and Faber Residence in the Clementi area, which moved 344 units or 86 per cent of its 399 units at an average of S$2,160 psf.

Earlier in the year, LyndenWoods at Singapore Science Park, Springleaf Residence in the Upper Thomson area and Lentor Central Residences booked sales of more than 90 per cent at their respective launches.

Certainly, buyers snapping up almost all the units off-plan at a condo project’s launch, when a project’s development is at its infancy, should cheer developers.

Locking in strong sales at launch significantly de-risks a project. Also, a developer can enjoy stronger financial returns due to lower finance costs as a result of drawing down less debt financing for construction.

Nonetheless, selling out nearly all the units at a condo project’s launch has downsides for developers.

Maximising profit

One, might a developer who sold almost all of a condo project’s units at launch have underpriced the units and missed out on achieving stronger profits?

For example, selling, say, 70 per cent of units at launch instead of more than 90 per cent may significantly de-risk a project while leaving a developer with ample available stock to sell subsequently at higher prices thereby boosting a project’s profitability.

Think about it. A developer might be able to sell a unit three years after a project’s launch when the project is just completed for much higher than the launch price. For one thing, home prices could have climbed by about 12.5 per cent over three years, assuming growth of 4 per cent annually. Furthermore, some buyers may pay more for a completed product versus one that is sold off-plan.

Fight for land

Two, given that developers generally need to develop housing sites and sell the inventory within strict timelines or face hefty penalties, they have to constantly replenish their residential land banks.

In short, a developer who successfully launches a new condo project might have to buy a new housing site fairly quickly to ensure a robust residential development pipeline.

Amid strong sales at new condo launches, competition for housing sites is intensifying and could grow fiercer. The tender for a 99-year leasehold Dorset Road private housing site near Farrer Park MRT station that closed earlier this month drew nine bids. A UOL-led consortium secured the site with a top bid of S$524.3 million, or S$1,338 psf per plot ratio that was towards the upper end of analysts’ forecast.

The housing development market here is fragmented. Active players looking to replenish condo development land banks can expect fierce competition from peers as well as more inactive players and even new entrants – all of whom may be encouraged to expand in housing development here because of buoyant demand.

Typically, land cost is the single biggest cost item in a condo project, accounting for possibly 60 per cent or more of gross development costs. If housing land costs are substantially elevated due to fierce competition for sites, developers will see rising project risks and profit margins come under pressure.

Government actions

Three, might the government significantly boost private housing supply or move to temper demand?

The government plays a major role as a seller of housing sites under the government land sales (GLS) programme. Perhaps the H1 2026 GLS programme will see a major ramp-up in supply of sites for condominium as well as executive condominium developments to meet rising housing demand.

Substantially boosting private housing supply can potentially soak up demand, which is largely driven by Singapore citizens and PRs buying their first homes. Indeed, with much greater supply of housing sites, developers may end up fighting hard over a possibly limited pool of buyers.

What could potentially worry developers even more is the risk that the government acts pre-emptively to curb housing demand. After all, there have been numerous rounds of property cooling measures over the years.

While strict home loan guidelines exist, are buyers lulled by low mortgage rates and complacent over possible economic weakness? Maybe there is a case for acting fast to ensure there is no over-exuberance in the private housing market by tightening up on, say, the total debt serving ratio (TDSR) or the loan-to-value (LTV) threshold.

TDSR refers to the portion of a borrower’s gross monthly income that goes towards repaying monthly debt obligations, including the loan being applied for. When a financial institution extends a housing loan, it should ensure that a borrower’s TDSR is no more than 55 per cent.

The LTV limit determines the maximum amount an individual can borrow from a financial institution for a housing loan. Currently, subject to meeting other criteria, the LTV limit for a borrower with no outstanding housing loans is 75 per cent.

Other tools to curb housing demand could include hiking transaction costs for locals and PRs who are buying their first home. Today, local first homebuyers do not pay additional buyer’s stamp duty (ABSD), while PRs buying their first homes pay 5 per cent ABSD.

Amid growth in household formation, aspirations among many people for condo living, higher Housing & Development Board resale flat prices, rising income levels and low interest rates, private housing demand is robust. This bodes well for condo developers here.

Certainly, developers will aim for strong sales at the launch of their condo projects. Still, developers with an eye on the long term might be hoping to see less frenzied buying at new condo launches. After all, strong home buying could possibly lead to over-aggressive bids for housing sites as well as moves by the government to cool the private residential property market.