“Developers are very land hungry,” with very little land-banking and very few government land sales set for this year, she said.

But Mok also noted that developers were likely to see thin margins, potentially falling below 10 percent, compared with the previously typical double-digit rates.

Analysts at Citi estimated that the net margin for the Stirling Road site at around 5 percent.

“Such risk-reward could only be justified on an assumption of higher selling prices. However, this assumption may be called into question should the government ramp up land supply in the second half of 2017,” the Citi analysts said in a note last month.

However, a representative of Logan Property disputed Citi’s margin estimate, pointing to an alternate analysis suggesting a 20 percent net margin.

“We reckon our bid is reasonable given the excellent location and the quality land site,” the representative said via email.

Citi expected the government would increase the land supply later this year, given the “ferocity of bidding,” which would also pressure development margins.

Analysts noted that some of developers’ recent land-banking efforts suggested they were betting on significant price jumps by the time the developments were completed in several years.

For example, last week, Savills Singapore brokered an en bloc deal for a 1 Draycott Park, a building near the tony Orchard shopping area, for buyer Champsworth Development, a unit of Malaysian company Selangor Dredging.

The break-even price for the new development was expected to be around S$2,700-S$2,800 per square foot, Savills Singapore said. Selangor Dredging didn’t immediately return an emailed request for comment.

The average per square foot price for Singapore units sold in May came in at S$1,281, with the upscale Orchard area seeing transactions for uncompleted units at around S$1,967-S$2,283 per square foot, according to data from Squarefoot Research.

For another recent en bloc sale, the Rio Casa development was purchased last month by a consortium of developers for S$575 million, which analysts at DBS noted was around 27 percent above the reported asking price.

In a note last month, the DBS analysts estimated that the breakeven price was around S$1,100 per square foot, with the sales price potentially above S$1,300 a square foot, compared with units in surrounding developments trading at S$700-S$1,030 a square foot in the first quarter.

Knight Frank’s Tay said investors may expect higher land prices will re-rate the prices of existing properties in the vicinity higher.

“Will the market tolerate [the higher prices]? Time will tell,” Tay said.

There are some nascent signs that prices could begin to recover, after falling more than 10 percent from their peak in the third quarter of 2013, but that doesn’t guarantee the magnitude of gains that developers may be counting on.

SRX Research, part of SRX Property, a property website under the umbrella of Singapore Press Holdings, said on Wednesday that its preliminary data for May showed prices for private non-landed residential properties rose 1.5 percent on-year and 0.4 percent on-month.

Those price gains were concentrated in central areas, with prices in other areas still falling, the data showed.

That came along with a surge in resale volumes, with 1,235 non-landed private units changing hands in the secondary market in May, up 17.4 percent on-month and nearly 58 percent higher on-year, SRX Research’s preliminary data showed.

In the public housing market, resale prices fell 0.1 percent on-month in May, but sales volumes rose 8.1 percent on-month, SRX Research data showed.

Knight Frank’s Tay noted that one of the reasons for the high land and en bloc prices was the presence of foreign developers in the market.

He said foreign players are considering Singapore land prices in comparison with other global cities, such as London, Shanghai, Hong Kong and New York, which makes the city-state look relatively cheap, even as land prices rise.

Tay also pointed to Singapore’s currency, which has remained fairly strong, making it an attractive bet for Chinese developers facing a declining yuan at home.

A similar dynamic may be playing out with Malaysian developers, as the ringgit has also taken a hit over the past three years.

Eli Lee, an analyst at Singapore-based OCBC Bank, said the entire en bloc process may help to bolster prices.

“Under a typical en-bloc sale, homes are taken out of the physical supply for an extended period (as the old development gets demolished and redeveloped over four to seven years) while previous home owners, flush with cash and credit headroom, often re-enter the market rapidly to re-establish their exposure,” he said in a note on Wednesday. “The general dynamics of collective sale transactions are systemically positive for the market.”

He expected home prices would reach an inflection by 2018.

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