Caution in the local property market

The drop in the number of bids for land sale sites appears to indicate that a degree of caution has settled in the property market.

A recent Urban Redevelopment Authority land tender for a commercial site along Robinson Road and Cecil Street closed with only three bidders.

According to a report by DBS Group Research, the “response was lukewarm” on the back of the global uncertainties and potential knock-on impact on the office rental market.

The winning bid for the commercial site was S$311.8 million, or S$882 per square feet per plot ratio (psf ppr). Still, DBS said the winning bid was “fair despite being below at the lower end of earlier market expectations of S$995 psf ppr.

Meanwhile, bids by developers for residential government land sales have also moderated.

Last month, the winning bid for a site at Punggol was S$323 per square foot per plot ratio, one of the lowest prices paid for a condominium land parcel in that area over the last two years.

Mr Ku Swee Yong, CEO of International Property Advisor, said: “I wouldn’t expect the bids to be higher than the previous comparable government land sales in the vicinity.”

One reason could be that banks are increasingly cautious about extending loans.

“The lenders at the same time are going to be a bit more cautious in terms of the numbers that they would be supporting the developers for the bid prices,” added Mr Ku.

Still, bidding interest is likely to remain for sites in sought-after areas.

“Going by the September release of monthly numbers, the take-up rate is still fairly stable and pretty impressive in some projects,” said Jones Lang LaSalle head of research and consultancy Chua Yang Liang.

Dr Chua added that some developers may remain bullish on sites in the suburbs, near train stations where winning bids can go up to S$600 per square foot.

Source : Today – 22 Sep 2011

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