RATIONALIZING THE BIDDING AND PRICING BEHAVIOUR OF DEVELOPERS

Abstract

Developers in Singapore face land constraints when the government maintains strict control over land sales. Developers' main source of land supply is through the Government Land Sales (GLS) programme whereby the government will release land according to market sentiments. Regression analysis indicates which factor(s) contribute significantly to the bid price. Findings revealed that number of bidders, property price index, land area and gross plot ratio contributed significantly to the tender price. The winner's curse is an important aspect in tender prices. It arises from judgmental failure when there is an overestimate of the value. Multiple regression showed that both state of the market and size of land significantly contributed to the winner's curse. From the survey of 10 Singapore developers, deductions could be developed from the rationale behind their bidding and pricing patterns. Developers placed high emphasis on location when bidding for land and their pricing patterns tilt towards aggressive when the land was of good strategic location, sound market sentiments and promising future growth. Developers react in certain behaviour due to many predictor considerations; hence sometimes result in an overbid price.