OWNERSHIP CONCENTRATION AND MARKET POWER IN SINGAPORE LAND AUCTIONS

Abstract

The determination of land pricing is of fundamental importance to developers and real estate researchers. Developers are known to bid aggressively when faced with intense competition. Thus, a higher winning price for the land is expected in the process. This dissertation seeks to investigate the factors leading to firm’s entry decision in a land tender. The paper also aims to examine the notion that developers are capable of exercising their market power to influence winning land tender prices in different regions and the whole of Singapore, at the aggregate level.

The findings revealed that Developers are aware of their competitor’s presence in the area and its associated level of competition. This determines their entry into the land tender bidding. However, developers generally do not consider their competitors and the region which the plot resides in submitting their land bid. The attractiveness of the land parcel given by accessibility and proximity to the central business district are of foremost importance in ascertaining land price.

The findings also shed light into the relationship between agglomeration concentration and winning land price. The overall Singapore and six regions were examined to analyze the type of market structure. In regions where there is the presence of dominant firms who hold high market shares, these firms have the ability to influence winning land prices. However, the lack of competition among developers has led to a decrease in the selling price of the land. Interestingly, the results showed the density of the plot contributes to the overall importance in determining land pricing.