Competition for quality land sites expected to heat up

It’s all about location for property developers who are on the lookout for quality land parcels.

Recent land tenders of government land sites close to MRT stations or regional centres have seen bids as high as S$550 million or S$869 per sq ft per plot ratio.

Market watchers say competition among developers for such sites will heat up, now that developers are churning out projects at a much faster rate.

The government land sales (GLS) programme for the first half of this year comprises 10 land parcels near MRT stations or regional centres.

Five of the land sites have already been released for sale.

Recently, Keppel Land won a tender for a Sengkang site for S$287 million. The site attracted about 11 bids.

A Bedok Reservoir site attracted eight bids earlier this month, with United Venture Development putting in the top bid of S$320 million.

And Capitaland submitted the highest bid of S$550 million for a reserve-list Bishan site. The tender attracted a record 19 bids.

Analysts say the remaining land sites should see keen interest from developers, now that the property boom is tapering off and developers are re-entering the land market in a big way to deploy their cash.

Colin Tan, head of research & consultancy at Chesterton Suntec International, said: “For the past two years, most of the developers have been highly profitable. This is a dilemma now. They have lots of cash and what do they do with it? That’s why you see quite a good participation rate for most of the state land sales.”

Analysts say competition for quality land sites will strengthen, as developers buy prime land sites to hedge against the risk of further government cooling measures and as home sales moderate. This is because a convenient location is a key selling point for property projects.

Nicholas Mak, executive director of research at SLP International, said:”(Previously) the developer might require anywhere from 12 months to 18 months from the time they acquire the land to the time they launch (homes) for sale. But nowadays this process may be shortened from 7 months to 12 months. What the developers are doing is try to reduce the risk of future market turbulence…if they are able to bring the product to the market as soon as possible.”

But land sites located near public transport hubs and everyday amenities do not come cheap.

Analysts say smaller developers may be priced out of such land tenders.

They will have to made do with public housing sites, which are less profitable than private land sites. Or, they will have to buy land at enbloc sales — which are time-consuming and often contentious.

Source : Channel NewsAsia – 22 Mar 2011

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