LAND SALES IN SINGAPORE AND DEVELOPER'S MARKET POWER

Abstract

Land supply in Singapore is highly dependent on the sale of state-owned sites under the Government Land Sales (GLS) programme. This paper aims to identify the key determinants that affected the bidding outcomes for 81 non-landed residential GLS auctions between 2000 to 2011 period. Besides site features, it examines if developers’ market power in an area influences the outcomes of a sale. The results show that the intrinsic characteristics of the subject site are of more importance than the developers’ market concentration in the vicinity of the site. Intrinsic characteristics such as permissible plot ratio, distance to the CBD and distance to an MRT station are the main factors affecting the number of bids and the actual bid price. The developers’ market concentration as measured by the Herfindahl index was not significant. This may be due to the oligopolistic nature of Singapore developers where toehold effects are less concentrated spatially. Further, the use of progressive payment schemes may reduce the financial disadvantage of smaller players, particularly in bidding for smaller sites. Lastly, the study period coincides with the enbloc sales boom when large private land supplies are released into the market. However, the impact of market concentration may matter going forward when land supply for private residential development becomes more reliant on the GLS programme as in the case of Hong Kong.