Developers’ bullish bids

Property developers are still bidding aggressively for land despite the Government’s announcement of more land sales in the second half of this year.

As the tender closed for the residential site at Upper Serangoon yesterday, a top bid of $113.7 million had been submitted by China based developer Qingdao Construction.

That translates to $607 per square foot (psf) – the second highest recorded for a 99-year leasehold land parcel sold by the Government for non-landed housing in the Rest of Central Region, said Ms Tay Huey Ying, Director for Research and Advisory of Colliers International.

It is second to Wing Tai Land and Greatearth Developments’ joint bid of $639 per square foot per plot ratio for the site on Alexandra Road and Tiong Bahru Road back in pre-crisis December 2007, said Ms Tay.

The Urban Redevelopment Authority received 15 bids for the 4,971.8 sq m site which it launched in April, from the Confirmed List of the Government Land Sales Programme. The site can yield a maximum gross floor area of some 17,402 sq m.

The second highest bid of $110.6 million came from Malaysia-based SP Setia International.

The lowest bid price was $60.1 million, which came from Kingston Development, a unit of Hong Leong Holdings.

“Given the ample supply of residential sites that the Government will make available in the second half of 2010, the response of 15 bids to this tender is above market expectations and the quantum of the top few bids are bullish,” said Mr Li Hiaw Ho, executive director, CBRE Research.

Market observers attributed the strong bid turnout to the land’s size and its proximity to the Potong Pasir MRT station.

“The small land area enables bidders to bid at bullish unit land price while still keeping the quantum price within an affordable level,” said Ms Tay.

The top bid reflects a breakeven price of between $850 psf and $1,000 psf and selling price of between $1,000 psf and $1,200 psf for a new project on the site.

Industry experts said the bidding war shows developers remain bullish on the property market. However, some also argue that the market is behaving irrationally.

“Developers are bidding higher because they have the liquidity and would rather invest the funds for a smaller margin than let them be idle. But this also means that they will have to sell higher,” said Mr Colin Tan, consultancy director, Chesterton Suntec International Research.

“Meanwhile, buyers also seem willing to buy the property at the higher price. However, it remains to be seen if the wage increase can support these sentiments.”

The bids come on the heels of a series of record-breaking number of bids for tenders over the last two months. The Simei Street 3 site, the Tampines Road site and the land site at Boon Lay Way and Lakeside Drive drew 18, 16 and 14 bids respectively.

Source: Today, 3 Jun 2010