Cautious bidding for Mt Vernon site

Straits Times: Wed, Jan 11

CAUTION is the watchword among developers, going by the lacklustre response to a residential site in Mount Vernon Road.

The offers were short of market expectations and well under what a similar site pulled in last year, raising hopes among buyers that home prices will soon drop, following the property cooling measures.

A consortium comprising Hong Leong Group, City Developments and TID Residential lodged the highest bid of $388.1million for the 99-year leasehold plot. That works out to $495 per sq ft (psf) per plot ratio (ppr).

That offer was about 20 per cent below what the same group offered for a similar site that they eventually secured last March. There were eight bidders last March, but only five for the latest tender.

It was much the same last month. Then, a tender for an executive condo site that closed a week after the Dec8 cooling measures were introduced yielded a top offer that was 13per cent under that for a comparable land parcel sold a year earlier.

Frasers Centrepoint and Lum Chang Building Contractors lodged $360.8million – or $460 psf ppr – for the 20,811 sqm Mount Vernon site.

IOI Properties, MCL Land and Mezzo Development, which lodged the lowest bid of $250.8 million – 35 per cent below the top bid – made up the numbers.

Experts said interest in the site could have been dampened by the additional buyer’s stamp duty imposed on foreign buyers and investors, the ample supply of upcoming sites for sale, and the uncertain economic conditions.

Mr Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group, said the top bid was ‘below market expectations’ even after factoring in site constraints and market conditions.

If the consortium wins the site, its land cost for the two parcels will be averaged down to about $558 psf ppr, he noted. Average selling prices for the projects on both sites are expected to be between $1,100 and $1,200 psf.

However, a DMG property research report said the result was ‘unsurprising’.

With the new measures, developers will now need to build and sell all residential units within five years or pay an additional stamp duty of 10 per cent.

‘This may inadvertently raise site acquisition costs of developers, who are likely to submit bids for (government) land at more conservative levels to buffer for lower average selling prices (so that they have more) confidence in selling out… before the five-year limit,’ the report said.

Mr Ong Teck Hui, head of research and consultancy at Credo Real Estate, added that the land price of $388.1 million is still a substantial sum and that many developers could have given it a miss due to higher market risks.

The breakeven price for the development is expected to be between $900 and $950 psf, with selling prices possibly at around $1,000 psf, Mr Ong noted.

An 861 sq ft unit at nearby residential project Suites@Braddell was sold by its developer for $983,000 – or $1,142 psf – last August.

Ms Betsy Chng, head of sales and marketing at Hong Leong Holdings, said securing the Mount Vernon site will strengthen Hong Leong’s position in the area.

The Straits Times understands the 702-unit Singapore Condo Bartley Residences will likely be launched next month.

‘Located close to the upcoming Paya Lebar commercial hub, and next to Bartley MRT station, we are confident our projects in the area will offer residents convenience and value,’ she added.

Source: The Straits Times © Singapore Press Holdings Ltd.

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