Developers to hold back at future land bids

Strong sales at recent condominium launches have put developers in a bind.

Within a week of launching, the Luxurie in Sengkang sold a quarter of its units, at an average selling price of S$1,100 per square foot, while the Meyerise at Meyer Road sold 35 per cent of its units, averaging 1,800 per square foot.

While they need to bid for new land sites in order to replenish their land banks, the threat of an economic slowdown is forcing them to hold back.

With private home prices moderating for over a year, there has been a softening in bid prices for residential sites.

Last month, the winning bid for a mass-market site at Punggol was S$323 per square foot, one of the lowest prices paid for a condominium land parcel in that region in the past two years.

This comes as developers factor in the negative macroeconomic outlook and the bumper crop of public housing that will flood that market by 2013.

25,000 flats will be launched for sale this year, and will be completed by around 2013.

According to property analysts, banks have also turned more cautious in their lending.

This may put a cap on how high bid prices can go in the next round of the government land sales programme.

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

“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.”

Still, bidding interest is likely to be keen especially on sites in sought-after estates.

Out of the 13 sites released for condominium development under the government land sales programme for the second half of the year, a handful that are in estates such as Bedok and Yishun, will be closely watched.

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

“So going by those performances – and depending on location – some developers may remain bullish in those particular segments, particularly those in the suburbs, near train stations.”

Analysts said winning bids for these mass-market sites can go as high as S$600 per square foot.

With sales at over S$1000 per square foot, developers are still making good profits.

According to a report by CLSA, projects launched from government land sales sites over the past year achieved margins ranging from five to 33 per cent.

Source : Channel NewsAsia – 20 Sep 2011

COMMENTS