Firm home sales lure bidders out in post-CB government land sales

Singapore

HEALTHY home sales in the past five months whittled down property developers' inventory, which has in turn boosted their appetite for land.

This came through in the stronger-than-expected top bids for two 99-year leasehold sites at state land tender closings on Thursday. The absolute price quantum, deemed relatively palatable for developers, helped boost their attraction in what was the first residential Government Land Sales (GLS) tender closing since the Phase 2 re-opening of Singapore's economy following partial lockdown imposed to contain Covid-19.

Of the two plots, the more hotly contested one is next to Tanah Merah MRT station.

The site, zoned for residential, with commercial units on the first storey, drew 15 bids. The top bid by MCC Land (Singapore), part of a diversified Chinese state-owned enterprise, was S$248.99 million or about S$930 per square foot per plot ratio (psf ppr). This was 4.6 per cent higher than the second-highest bid by a tie-up between City Developments Ltd (CDL) and TID.

The other plot, an executive condominium (EC) housing plot in Yishun Avenue 9, fetched seven bids.

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The top bid from Sing Holdings came in at S$373.5 million or S$576 psf ppr; this was 8.9 per cent above the second-highest bid from a partnership between CDL and Hongkong Land subsidiary MCL Land.

CBRE's head of research for Southeast Asia, Desmond Sim, said: "Given the environment of rising construction costs, the respective bid prices are likely to set new benchmark S$psf launch prices for their respective markets and asset classes in the future."

ERA Realty's head of research and consultancy, Nicholas Mak, estimates MCC Land's breakeven cost for the plot in Tanah Merah Kechil Link to be between $1,480 and S$1,540 psf.

Showsuite Consultancy's chief executive, Karamjit Singh, commented that the top bid would require the developer to sell the new apartments for about S$1,700 to S$1,800 psf, which is "bullish, considering that new units in that area are currently trading at between $1,500 psf and $1,600 psf."

Tan Zhiyong, chief executive of MCC Land (Singapore), said: "We are very confident of developing an exciting residential landmark with about 2,000 sq m of retail space on this relatively sizeable site. It will be a highly liveable environment brimming with smart and sustainable features."

The company is a subsidiary of Metallurgical Corporation of China, a Fortune Global 500 company listed in Hong Kong and Shanghai.

JLL Singapore's senior director of research and consultancy, Ong Teck Hui, noted that the residential component of the Tanah Merah project is likely to be launched in late 2021, when buying demand could improve further alongside expected economic recovery.

Mr Ong also said that the stronger-than-expected tender participation and top bid for the plot could point to growing demand for residential land, in anticipation of a 2021 market recovery. "If the GLS programme continues to be conservative in offering sites for sale, there could be a spillover effect into the collective sales market to meet demand from developers."

The land parcel can yield about 265 homes in addition to the commercial space.

For the Yishun EC plot, top bidder Sing Holdings' chief executive and managing director Lee Sze Hao said the group's proposed scheme for the site is a 15-storey project with full condo facilities. "We're looking at nearly 700 units - two-, three- and four-bedroom units. This will be the first EC site in Yishun since 2014."

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

Mr Mak estimates the breakeven cost for the Yishun Avenue 9 EC site to be between S$1,000 and S$1,050 psf. "The developer probably plans to launch the new EC at prices above S$1,100 psf."

JLL's Mr Ong noted that as ECs in Yishun tend to fetch mediocre prices, the top bid at S$576 psf ppr seems robust. "The last EC tender in Fernvale Lane in March 2020 fetched a top bid of S$555 psf ppr."

Also bidding for the Yishun Avenue 9 EC plot on Thursday were: