Developers hungry for land, but not likely to binge: analysts

Singapore

THE maiden residential state land tender for this year reflects developers' healthy appetite for replenishment land in the face of shrinking unsold inventories amid strong private home sales.

A tender for a 99-year leasehold plot directly connected to Farrer Park MRT Station near Mustafa Centre attracted 10 bids at a state tender when it closed on Tuesday.

While the number of bids was within market expectations, the top bid of S$1,129 per square foot per per plot ratio (psf ppr), or an absolute price of S$445.89 million, was towards the upper end of a range of forecasts from analysts polled by BT on Monday.

The 0.87-hectare land parcel, located along the future Northumberland Road, is zoned "residential with commercial at first storey".

The top bid - from a tie-up between City Developments Ltd (CDL) and MCL Land - was 5.7 per cent more than the next, from Wing Tai.

Huttons Asia research director, Lee Sze Teck, noted that the top bid is 12.8 per cent higher than the S$1,001 psf ppr fetched for the previous state land tender in the locale, at Perumal Road, back in January 2017. (That tender exercise drew 11 bids and the plot is being developed into the Uptown @ Farrer project.)

Nevertheless, Mr Lee said the top bid at Tuesday's tender is still measured. "The Urban Redevelopment Authority's non-landed private residential property price index increased 17.4 per cent from Q1 2017 to Q1 2021, much more than the increase in land price. This shows that developers are mindful of the potential risk of new cooling measures affecting demand."

JLL's senior director of research and consultancy, Ong Teck Hui, said: "From this tender, we can see that demand for residential land is firm, and while developers are prepared to bid strongly, they have not gone overboard, taking into account risks associated with development costs and the ongoing pandemic."

Knight Frank Singapore's head of consultancy, Alice Tan, noted that Tuesday's tender closing was some six months since the last GLS tender in late-October. "Given the rather long period in between tenders, developers were hungry to replenish their land banks."

She highlighted that the number of unsold private housing units in uncompleted projects with planning approvals has dwindled from a high of 36,839 units in Q1 2019 to 21,602 units in Q1 2021 , based on URA data.

"At the same time, government land sales are few and far between, with collective sales practically negligible in the pandemic year of 2020. These factors could possibly combine to create a compression point where the shortage of development land could lead to competition heating up among developers to secure available land parcels from the GLS lists."

ERA Realty's head of research and consultancy, Nicholas Mak estimates that the new residential project at Northumberland Road may be launched at S$2,000-S$2,100 psf.

In a statement, CDL said that the group and its joint-venture partner MCL Land plan to develop the site into a mixed-use project comprising 408 residential apartments of up to 23 storeys and commercial retail space (including an infant care and childcare centre) on the ground floor.

"Once completed, the development will enjoy direct access to Farrer Park MRT station on the North East Line, with Dhoby Ghaut MRT station, a triple-line MRT interchange, only two stops away."

CDL's group chief executive officer, Sherman Kwek, said: "Our residential projects have sold well over the past few years and the acquisition of the Northumberland Road site ensures that CDL maintains a healthy inventory level in Singapore."

MCL Land's chief executive, Tan Wee Hsien, said: "We have full confidence in the long-term fundamentals of the Singapore residential market and we look forward to creating a unique and exciting project for the community."

Also bidding at Tuesday's tender were Far East Organization (jointly with Sino Group), CSC Land Group, EL Development, Sim Lian Land, units of Hong Leong Group Singapore, Kheng Leong Company and GuocoLand.

The lowest bid of S$648 psf ppr came from Japura Development, an entity linked to Hongkong billionaire tycoon Li Ka-shing's CK Asset Holdings - "suggesting some opportunistic bidding" as PropNex research head, Wong Siew Ying, put it.