Saturday, September 19, 2009

Bids show developers still hungry for land

But future offers may be more restrained as more land is released

THE results of a government land tender for a suburban location show how hungry developers are for building sites, say analysts.

A dozen developers have lodged bids for a 2.1ha plot at the corner of Yio Chu Kang and Seletar roads – a site that is not near an MRT station. A land tender ordinarily draws six to eight bidders.

Analysts say demand for land is expected to stay strong, but they expect most developers to be more cautious in their bids in the months ahead, given that more land will be made available for sale soon.

The Government said on Monday that it will reinstate the confirmed list of sale sites for the first half of next year, among other measures aimed at tempering exuberance in the market.

Under the confirmed list, sites are pushed out for sale according to schedule, regardless of developers’ interest.

The latest site was the third put up for tender by the Government this year to attract very strong interest. The first and second land tenders each drew 13 bids.

Developers might have been expected to turn cautious for the site, in the Seletar Hills area, but Far East Organization gamely topped the tender with an aggressive bid of $376.29 per sq ft per plot ratio (ppr) – 35 per cent higher than the second bid.

It reportedly plans to build 150 to 200 apartments and a Holland Village-style shophouse cluster. There could be a supermarket, restaurants, pubs and wine bars.

‘Far East’s bid is very optimistic, but the area does have its charms. It is not congested, and it gives off village-like vibes,’ said Colliers International director of investment sales Ho Eng Joo.

However, developers are likely to be slightly more cautious going forward in terms of the number and value of bids, said Mr Ho.

‘You know the confirmed list will be out, but you don’t know how many sites will be put on it, how big the plots are and where they will be located.’

He added: ‘Now, developers’ thinking is: ‘If I miss this plot, I can try my luck next year’.’

DMG & Partners Securities said in a report yesterday that competition for upcoming sites should subside to ‘possibly normalised levels of six to eight bids’ given the recent cooling measures.

But sites with strong attributes will still attract strong demand, experts said.

‘Developers’ demand clearly outweighs the stock of land. The buying momentum will carry on as the outlook remains positive,’ said Credo Real Estate managing director Karamjit Singh.

‘Interest in well-located sites will still be hotly contested because the completed project will be easy to market.’

A developer who declined to be named said: ‘Despite the measures, developers would definitely remain competitive when the market is good. Developers know the Government will introduce more land, but it is likely to be sensible in its approach.’

The government sales list is likely have a range of plots with different sizes to suit different developers’ appetite, he said.

The next land tender to watch out for is for a parcel at Serangoon Avenue 3 next to the Lorong Chuan MRT station and near the Australian International School.

DMG said the response should form a ‘more accurate barometer of developers’ outlook on land/selling prices and demand for mass projects’ sustainability in the wake of the cooling measures’.

Mr Ho expects bids to be at the lower end of $350 to $400 psf ppr.

But DTZ South-east Asia research head Chua Chor Hoon still expects more than 10 bidders, with a top bid of about $450 psf ppr. There is even a chance the top bid could be up to $500 psf ppr, based on the strong response for recent sites, she said.

In high demand:

Chestnut Avenue site

No of bids: 13
Trigger bid: $62 million/$121 psf ppr
Top bid (Hong Leong): $143.7 million/$280 psf ppr, 11% above second-highest bid

Dakota Crescent site

Number of bids: 13
Trigger bid: $130 million/$201 psf ppr
Top bid (UOL): $329 million/$508 psf ppr, 5% above second-highest bid

Yio Chu Kang/Seletar Road site

Number of bids: 12
Trigger bid: $40.5 million/$128 psf ppr
Top bid (Far East): $119 million/ $376 psf ppr, 35% above second-highest bid

Source: Straits Times, 19 Sep 2009

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