Start of fall in land prices?

Business Times: Fri, Aug 12
(SINGAPORE) Despite the ongoing global financial turmoil and economic uncertainty, developers are confident about demand for private homes in choice suburban locations – although they are building in some cushion for a potential price decline. At t…

(SINGAPORE) Despite the ongoing global financial turmoil and economic uncertainty, developers are confident about demand for private homes in choice suburban locations – although they are building in some cushion for a potential price decline.

At the first tender for state land in Singapore following the start of the stockmarket rout last week, a 99-year private condo plot at Pheng Geck Avenue next to Potong Pasir MRT Station fetched 15 bids. That equalled the number of bids for a nearby site in June last year.

However, the top bid at the latest tender, from Tuan Sing unit Clerodendrum Land, of $567.31 per square foot of potential gross floor area was 6.6 per cent lower than the $607.20 per square foot per plot ratio (psf ppr) that Qingdao Construction paid in June 2010 for the neighbouring plot, which is being developed into Nin Residence.

‘This indicates the market has softened and developers are taking a more conservative view, although they are still very keen on choice sites next to an MRT station,’ said Francis Koh, managing director of Koh Brothers Group, the second highest bidder at yesterday’s tender. Its price of $548.11 psf ppr was 3.4 per cent below the top bid.

Koh Brothers unit Realty Consortium’s price in turn was 2.2 per cent above the next highest bid of $536.16 psf ppr from Qingdao Construction.

A partnership between Hoi Hup Realty, Sunway Developments and Oriental Worldwide Investments was in fourth place, at $510.46 psf ppr.

Credo Real Estate executive director Ong Teck Hui said that the relatively narrow gaps between the top bids suggest that ‘the interested parties are reading the current market turmoil with similar concerns, leading to similarly measured bidding’.

When the tender for the site was launched in June, Mr Ong had forecast the top bids to be in the $500-600 psf ppr range, with the tender drawing about five to eight bidders.

Knight Frank chairman Tan Tiong Cheng said: ‘The fact that 15 bids were received shows that developers still have confidence in the mass-market segment despite all the negative newsflow about the stockmarket and economy.’

However, an analyst said that developers have become cautious and would bid selectively, possibly giving a miss to unattractively located sites.

A Tuan Sing spokesman told BT that the group’s proposed scheme for the Pheng Geck Avenue site entails a development of about 350 units comprising one to four-bedder apartments housed in two 17-storey towers. ‘We aim to launch the project in nine to 12 months.’

He also estimated the project’s breakeven cost at about $1,100 psf.

However, CB Richard Ellis executive director Joseph Tan forecast a lower breakeven cost of $900-950 psf, and noted that between April and July 2011, units in Nin Residence – which has mostly one and two-bedroom units – were sold by the developer at $1,000-1,400 psf.

Analysts observe that this is the third residential development site that Tuan Sing will clinch in Singapore in the past nine months – after the freehold Serene House in the Cluny Park Road area opposite Botanic Gardens MRT Station and a 99-year leasehold site in Seletar.

The Tuan Sing spokesman said that the group had appointed SCDA as architects to work on the projects on those two sites.

Serene House will be redeveloped into a low-rise project with about 80 units (likely to be one to three-bedders) while the new development in Seletar will have about 300 units (one to four-bedders).

‘We plan to launch the Seletar project in Q1 2012, followed by the new project on the Serene House site in Q2 2012,’ added the spokesman.

The group is also poised to take a higher profile in the financial district. In June, the Urban Redevelopment Authority granted it provisional permission to redevelop Robinson Towers, its annex building and International Factors Building next door into a project with 253,275 sq ft gross floor area of offices and 4,090 sq ft of shop space.

Meanwhile, bidders at yesterday’s tender included BBR Property, Allgreen Properties, Far East Organization unit Transurban Properties (which bid about $465 psf ppr) and EL Development.

A City Developments- Hong Leong Group tie-up bid $440.57 psf ppr, while a Frasers Centrepoint- Keong Hong Construction partnership offered $383.22 psf ppr.

The lowest bid of $239.84 psf ppr was from Ace Asset Development, whose sole shareholder is Lim Tiong Joo.
Source: Business Times © Singapore Press Holdings Ltd.

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