State land tenders for private housing, EC plots draw fewer-than-expected bids

Kalpana Rashiwala
Published Tue, Sep 13, 2022 · 07:45 PM

STATE tenders for 2 private housing sites near Lentor MRT station and an executive condominium (EC) site along Bukit Batok West Avenue 5 have fetched fewer bids than had been forecast by most property consultants.

The top bids for the Lentor Central site (S$1,108 per square foot per plot ratio) and Lentor Hills Road Parcel B (S$1,130 psf ppr) were within the range of expectations of analysts polled by The Business Times before the tenders closed on Tuesday (Sep 13). They were also above the price of the closest comparable site, which was sold in January for S$1,060 psf ppr, and which will be developed into the Lentor Hills Residences project.

However, the top bid of about S$626 psf ppr for the EC plot in Bukit Batok was 5.4 per cent lower than the S$662 psf ppr winning bid for the next-door plot at a tender that closed in March.

Concerns of a supply build-up in the Lentor area, as the authorities release more private housing sites to stimulate the development of the new Lentor Hills Estate, may have kept most developers away from participating in the tenders for the 2 sites in the locale. However, property market watchers said the outcome of Tuesday’s state tender closings may also reflect some caution setting in among developers.

JLL’ s senior director of research and consultancy, Ong Teck Hui, said: “Rising interest rates, inflation, rising construction costs and macroeconomic uncertainties in 2023 (when the projects could be launched) could be some considerations, as they could make an impact on demand significantly.”

Developers are cautious as the prices of new EC projects are near the top-end of the price envelope. If developers were to launch a new EC project at above $1,300 psf, the pace of sale will be significantly slower as it would face buyers’ resistance.
Nicholas Mak of ERA Singapore

Commenting on the top bid for the EC plot in Bukit Batok West Avenue 5, as well as the fact that it drew only 4 bids, compared with 9 bids for the adjacent plot in March, Ong said: “This shows some softening in sentiments in the outlook for the EC market. The most recent launch of an EC project was North Gaia in Yishun in April, which sold 166 of the 616 units at a median price of $1,301 psf for the launch month, but sales progress has been slow.”

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ECs are a public-private housing hybrid with initial buyer eligibility and resale conditions, all of which are lifted 10 years after the project has been completed.

In similar vein, ERA Singapore’s head of research and consultancy, Nicholas Mak, said that North Gaia is the only EC project with a significant number of unsold units available. In the next 18 months, 3 other EC projects could be launched for sale to homebuyers.

OrangeTee & Tie’s Christine Sun, too, observed that some developers may have held back their bids as there will be a number of ECs launching in the vicinity. These include Copen Grand in Tengah Garden Walk; the new project in Bukit Batok West Avenue 8 (next to the EC site on offer at Tuesday’s tender closing); and the future development on the Tengah Plantation Loop site, which will be launched for sale in December.

Rising interest rates and higher construction costs may also have deterred some developers especially since margins are not huge for EC developments.

Said ERA’s Mak: “Developers are cautious as the prices of new EC projects are near the top-end of the price envelope. If developers were to launch a new EC project at above $1,300 psf, the pace of sale will be significantly slower as it would face buyers’ resistance.”

He also noted that the spread of the 4 bids for the EC plot at the latest tender closing was very close, with the top bid just 1.5 per cent above the lowest bid. “This shows that EC developers are facing similar cost structures for the development of ECs and may not be able to increase prices much,” he added.

He estimates that the possible future launch price for the new project on the site to be at between S$1,280 and S$1,330 psf.

By a whisker

The top bid for the site, from City Developments’ wholly-owned subsidiary CDL Zenith, was just S$1.05 psf ppr more than the second-highest bid, from Sim Lian Land and Sim Lian Development.

Sherman Kwek, CDL group chief executive officer, said: “We are very pleased to emerge as the top bidder for this tightly contested EC site in Bukit Batok West, especially at such a narrow margin of victory. Given the site’s proximity to the upcoming Tengah New Town and Jurong Lake District, it will benefit from easy access to a wide range of amenities, as well as good connectivity to such a key business, lifestyle and tourism hub. We look forward to transforming this expansive site into a sustainably designed and well-built residential landmark.”

The site at the junction of Bukit Batok West Avenue 5 and Bukit Batok Road is opposite the upcoming Tengah New Town, which will have amenities such as a community club, a polyclinic and an integrated bus interchange, he added.

Commenting on the dearth of bidders for the 2 Lentor private housing sites, Huttons Asia senior director of research, Lee Sze Teck, said: “Participation was muted as expected, probably because some developers are cautious about an area where the government can offer up to 11 sites for development.”

The plot along Lentor Central, which can yield about 470 private homes, fetched 3 bids, with the highest bid of S$481.03 million or S$1,108 psf ppr coming from a tie-up between a unit of China Communications Construction Company, Soilbuild Group and United Engineers Developments.

The second highest bid of nearly S$1,069 psf ppr was from CapitaLand Development’s Tanglin Land. GuocoLand teamed up with Intrepid Investments to place the lowest bid of nearly S$1,038 psf ppr.

The nearby Lentor Hills Road Parcel B drew just 2 bids, the higher of which was from TID Residential, at S$276.36 million or a tad above S$1,130 psf ppr.

The only other bid, at S$950.06 psf ppr, was from the consortium comprising China Communications Construction Company, Soilbuild and United Engineers Developments. This land parcel can generate about 265 private homes.

First-mover advantage

Giving his take, ERA’s Mak said: “The reason for the low tender participation rate (for the 2 Lentor plots) could be that some developers chose not to compete in the Lentor area with major developers such as GuocoLand and Hong Leong Holdings. GuocoLand has stakes in 2 of the upcoming condominium projects, namely Lentor Modern and Lentor Hills Residences. These 2 projects have a total of 1,200 units. Hence, the developers of these two projects will have significant pricing power in the Lentor residential market.”

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