Global developers unfazed by price of land in Singapore

Billionaire developer Kwek Leng Beng said last year that skyrocketing prices and restrictive rules made buying residential land in Singapore "suicidal". That has not stopped international developers from rushing in.

Land prices in some parts of the city-state are climbing at three times the pace of apartment costs, with plot values rising by an average 30 per cent per year since early 2011, according to property broker Chesterton Singapore, which used government auction data. Fourth quarter home prices slid for the first time in almost two years, as property curbs cooled values.

"The increase in land prices has had a tremendous impact on developers' profit margins," said Donald Han, managing director of Chesterton's Singapore unit. "Developers that used to enjoy margins in excess of 20 per cent will now have to contend with narrower returns."

Builders with international backing such as Kingsford Development and MCC Land have driven the gains as they sought to benefit from home prices that have jumped 61 per cent since mid-2009.

Land prices are squeezing their profits, while the city, ranked by Knight Frank as the most expensive to buy a luxury home in Asia after Hong Kong, has introduced measures that limit mortgages, require higher down payments and impose new taxes to tamp housing inflation.

Profit margins have narrowed to 10 per cent from up to 20 per cent as recently as three years ago, according to broker CBRE.