Property developers’ strong appetite for land banks are showing little signs of letting up, if the latest tender results announced by the Urban Redevelopment Authority (URA) for the Simei Street 3 site is anything to go by.
The 99-year leasehold residential site had been hotly contested, receiving a total of 18 bids – the highest so far this year.
That represents “an all-time high level of interest not seen in the Government Land Sales (GLS) tenders in the last five years for a site of this size and quantum (i.e. above $100 million),” said Mr Li Hiaw Ho, executive director of property consultancy firm CBRE Research.
Top bid for the residential site was $152.69 million submitted by CEL Development Pte Ltd, a property and development arm of Mainboard-listed firm Chip Eng Seng Corporation.
The second-highest bid was $148 million by Frasers Centrepoint, while the lowest bid of $113.8 million was submitted by Allgreen Properties Limited.
Developers with construction business arms dominated the top five bidders, with the top two bids having only a mere 3.2 per cent difference.
Ngee Ann Polytechnic real estate lecturer Nicholas Mak observed that such firms may be keen to build up their land banks, manage construction costs and possibly rely less on their construction business for profits.
Just last week, two earlier tenders – Boon Lay Way and Lakeside Drive, and the land site at Tampines Road – attracted 14 and 16 bids, respectively.
Mr Mak believes the latest number of bids is likely to influence the next few tenders, where double-digit bids can also be expected. In particular, the site at Upper Serangoon Road may attract more than 15 bidders, he said.
Difficulty in getting private land from en bloc sales may be driving developers to tap into the GLS programme, Mr Mak said.
The 11,793-sqm Simei site has a maximum gross floor area of 27,124 sqm, which can be developed into a residential area that could potentially yield 250 housing units.
Market watchers said the site will appeal to both HDB upgraders and private homeowners due to its proximity to the MRT and other amenities.
“[The] CEL bid of $523 psf ppr is very bullish,” Mr Mak said. He reckoned that the developer may have to target the higher end of upgraders as prices in the Simei area do not “move much”.
Industry observers estimate the breakeven price to be in the range of $840 to $900 per square foot (psf), which is much higher than the average price of Double Bay Residences at $660 to $750 psf.
“The new project on this site could fetch an average price of around $1,000 psf if it were launched in the first half of 2011,” said CBRE’s Mr Li.
URA said the award of the tender will be announced at a later date after the bids have been evaluated.
Source : Today – 12 May 2010