Property development no longer offers healthy returns for shareholders
DEVELOPERS' profit margins from Singapore private housing development projects have thinned so much that shareholders may well ask management if engaging in this activity makes business sense.
It would not be surprising if the top brass at some companies are asking themselves the same question.
Pre-tax profit margins for some private housing projects are down to around 10-12 per cent, or even sub-10 per cent.
Assuming a period of five years from the time of the land purchase to the completion and sale of the project, this works out to a meagre return on investment averaging a compounded 2 per cent a year.
A tough environment
Margins from property development have shrunk over the years in the face of rising land prices and construction costs…
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