Developers more cautious in bidding for GLS sites

/ EdgeProp Singapore |

September 4, 2018 2:38 AM SGT

The tenders for three government land sale (GLS) site tenders closed on Sept 4. This was the first batched closing of GLS sites after the latest round of property cooling measures were announced on July 5. Two of the sites were from URA’s Government Land Sales Programme, namely the Dairy Farm Road residential site with commercial use on the first storey; the non-landed residential site on Jalan Jurong Kechil; and the executive condo (EC) site at Canberra Link in Sembawang.

Bidding activity was “subdued” as indicated by the number of bidders and their bid prices, notes Desmond Sim, CBRE executive director of research for Singapore and Southeast Asia.

The cautious bidding by developers was most noticeable for the private housing sites, with five bids received for the Dairy Farm Road GLS site and three bids for the Jalan Jurong Kechil site, compared with nine bids for the Canberra Link EC site, says Tay Huey Ying, JLL head of research & consultancy, Singapore. She sees this as indicative of developers’ sentiment that demand for private homes will be more adversely affected than that for ECs.

TENDER RESULTS

	Dairy Farm Road	Jalan Jurong Kechil	Canberra Link
Use	Residential with Commercial uses at 1st storey	Residential	Executive Condominium (EC)
Land Area (sqm)	19,647.7	14,234.9	18,040.6
GFA (sqm)	41,261.0	19,929.0	45,101.5
Est. No. of Units	500	280	450
Top Bid Price(S)	368.8 million	215.0 million	271.0 million
Top Bid Price ($ psf ppr)	830	1,002	558
No. of Bidders	5	3	9

Source: JLL Research

Dairy Farm Road site

The highest bid of $368.8 million came from United Engineers’ wholly-owned subsidiary UEDR Residential. The bid price translates to a land rate of $830 psf ppr, which is 22.2% lower than the $1,068 psf ppr paid by Hong Leong Group for the Hillview Rise GLS site in June, points out JLL’s Tay.

Based on the land rate for the Dairy Farm site, Tay estimates the selling price for the new project to be in the range of $1,400 to $1,500 psf. The projected selling price for the Dairy Farm Road site is in line with the average transacted price of $1,437 psf recorded for the May 2018 launch of the second phase of Le Quest at Bukit Batok Street 41, according to JLL.

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Jalan Jurong Kechil

The number of bids received was three – a far cry from the 24 bids submitted for the nearby Toh Tuck Road GLS site in April 2017, which has since been launched as the 327-unit Daintree Residence. The highest bid of $215 million for the Jalan Jurong Kechil site was submitted by China Overseas Holding and CSC Land Group, says Nicholas Mak, ZACD executive director.

The bid price translates to a land rate of $1,002 psf ppr, and is considered “bullish” as it’s 6.7% higher than the price paid by S P Setia for the Toh Tuck Road site last year of $939 psf ppr, points out Mak. Based on the land rate of $1,002 psf ppr, the breakeven for the Jalan Jurong Kechil site is expected to be in the range of $1,640 to $1,700 psf, he notes.

Meanwhile, the selling price for Daintree Residence is an average of $1,702 psf, based on the 42 caveats captured by URA REALIS as of Sept 4, notes JLL’s Tay.

Canberra Link

Although interest in the Canberra Link EC site remained healthy with nine bidders, it pales in comparison to the 17 bids received for the last EC site at Sumang Walk that closed in February.

The top bid of $271 million for the Canberra Link site came from a joint venture between Hoi Hup Realty and Sunway Developments, and translates to a land rate of $558 psf ppr. This was just 4.3% lower than the $583 psf ppr paid by City Developments and TID for the Sumang Walk site, says JLL’s Tay. She reckons developers have taken into consideration the additional 5% non-remittable additional buyer’s stamp duty (ABSD) they have to pay for sites acquired after July 5.

ZACD’s Mak estimates the breakeven price for the EC site at Canberra Link to be in the $970 tp $1,020 psf range. The bullish bid reflects their confidence in the EC market, which is partly attributed by the strong sales at Rivercove Residences in Sengkang. Launched in April, the 628-unit Rivercove Residences saw 80% of the units snapped up at an average of $965 psf, and as at end June, only one unit was still available, adds Mak.

The government has not launched any EC sites in the Sembawang area since Oct 2014 when the site at Canberra Drive was sold. The site at Canberra Drive had only attracted two bids, and the average price then was $353 psf ppr, says Lee Nai Jia, Knight Frank Singapore head of research. The site has since been launched by developer Qingjian Realty as the 632-unit EC project The Visionaire.

“The EC market continues to generate healthy interest,” adds CBRE’s Sim. This segment that caters for the ‘sandwiched class’ remains limited in stock, with less than 20 units unsold as of end 2Q2018, he notes.

The fact that the top bidders for all three GLS sites are “companies involved in construction” means that they will be able to economize in the construction cost of their developments, says ZACD’s Mak.

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