(SINGAPORE) Developers may be starting to get cautious with land bids for 99-year leasehold mass-market condo sites as they heed the pronouncements of National Development Minister Khaw Boon Wan, who took office just last month. Frasers Centrepoint...
(SINGAPORE) Developers may be starting to get cautious with land bids for 99-year leasehold mass-market condo sites as they heed the pronouncements of National Development Minister Khaw Boon Wan, who took office just last month.
Frasers Centrepoint's top bid of $325.09 per square foot per plot ratio (psf ppr) at a state tender yesterday for a 99-year private condo plot at Flora Drive in the Upper Changi area was just 1.3 per cent higher than that for a nearby site sold in April last year (now being developed into Hedges Park Condominium).
This gap is narrower than the 10-22 per cent premiums achieved for other 99-year mass-market condo sites sold by the government in the past few weeks (in Woodlands, Buangkok and Pasir Ris) against comparable sites transacted last year.
Analysts also say that Frasers Centrepoint's top bid yesterday suggests that it worked in a safety margin for potential price softening. This marks a departure from developers' earlier strategy of assuming higher launch prices for their projects than prevailing prices in the respective locations when pricing land bids at state tenders.
Knight Frank chairman Tan Tiong Cheng said the outcome at yesterday's tender could mark a 'turning point' in the mass-market condo land price cycle.
Agreeing, Credo Real Estate executive director Ong Teck Hui said: 'I think going forward, it is quite likely that bids will not be as bullish as what we saw last year, for comparable sites.'
Said Mr Tan: 'Developers are acting cautiously and sensibly as they take heed of Mr Khaw's blog last week, warning about the dangers in the market, that property prices cannot keep on rising forever, of how we may hit a perfect storm,' he added.
'There will also be no shortage of supply,' he added. In August, the government will launch another plot next to the site tendered yesterday as part of the second-half 2011 Government Land Sales Programme.
The top bid at yesterday's tender by Frasers Centrepoint was just $1.43 psf ppr or 0.4 per cent higher than the next highest offer of $323.66 psf ppr by Hong Leong Group unit Tripartite Developers, which has a historically strong presence in the location, and which also clinched the nearby Hedges Park Condo plot last year.
This winning margin is one of the tightest ever seen at a state tender.
In addition, market watchers noted that the $325 psf ppr top bid yesterday was the lowest for 99-year private condo land sold so far this year.
Yesterday's tender drew two other bids - from Hiap Hoe unit Leng Hoe Development ($304.36 psf ppr) and Robert Kuok's Allgreen Properties ($262.02 psf ppr).
Said Mr Tan: 'People can see there is a willingness for government to truly want to satisfy demand for new HDB flats. They're ramping up supply of BTO (Build-to-Order) flats. In addition, there is anticipation of an increase in income ceiling for buyers of BTO flats as well as for DBSS (Design Build and Sell Scheme) flats and ECs (executive condominiums). So the end result of this will be that it will cannibalise some of the demand for mass-market private condos.'
CBRE Research executive director Li Hiaw Ho estimates Frasers Centrepoint's breakeven cost at about $700 psf.
Tripartite Developers released the Hedges Park Condominium project in April this year at an average price of $850 psf. Based on Urban Redevelopment Authority's May 2011 developer sales data, about 58 per cent of the 501-unit condo is sold.
Frasers Centrepoint's scheme for the plot tendered yesterday envisages a seven-storey project with about 430 units (ranging from one to four bedders). The project should be launch ready early next year