Here's why property developers are worse off today compared to 2008

Three issues are plaguing the market.

Singapore’s property developers are worse off today compared to the Global Financial Crisis of 2008, a report by CIMB revealed.

Analyst Lock Mun Yee said that market fundamentals are more challenging at present, with the sector buffeted by three intense headwinds.

These include property cooling measures, a residential supply glut, and slimmer development margins due to higher land costs.

“After the implementation of a series of macro-prudential measures by the government including higher transaction costs and more prudent debt servicing measures, demand for residential property has weakened. This, coupled with a slow rental market and rising incoming supply has led to higher vacancies and deteriorating private home prices,” she said.

Lock said that a tighter land market and aggressive bidding by foreign developers mean that land prices continue to stay elevated, leading to slimmer development margins.

“With revenue growth decelerating and the bottomline being affected by narrower margins, developers are increasingly looking to overseas markets such as Australia, the UK, China and other SEA countries to bolster their activities. The bright spot is that developers’ balance sheets are healthy with low leverage, enabling them to seek reinvestment opportunities,” she noted.