Time to build up land banks

Land prices stabilising as they have reached their peak: Analysts

The time is ripe for real estate developers to build up their land banks as land prices are stabilising, according to analysts.

According to Nomura’s latest Singapore property report, the recent tender for the 13,000-sq-m Upper Serangoon View site attracted “very tight” bids.

The top bid, put in jointly by Frasers Centrepoint, Far East Civil Engineering and Japanese developers Sekisui House, was $156.8 million, or $320 per square foot (psf) per plot ratio (ppr).

The next highest bid, tendered by unlisted developer Centurion, was around $152.9 million – a difference of only 2.6 per cent.

“The bids received were among the tightest for government land sales tenders since August last year and this could suggest developers’ expectations of land prices are approaching common ground,” the Nomura report said.

The narrowing of bids came despite the relatively lukewarm response to the tender. The Upper Serangoon View site attracted four bids, compared with six for the 15,630-sq-m Hougang Avenue 7 site.

The highest bid for the Hougang Avenue 7 site was $160 million, or $340 psf ppr, by Sim Lian Land.

Land prices are stabilising as they have reached their peak, noted Mr Colin Tan, head of research and consultancy at Chesterton Suntec International. They have tapered off from mid-year levels of $450 to $600 psf to about $350 to $400 psf, analysts say.

Now that the Ministry of National Development has announced the Government Land Sales programme for the first half of next year, future tenders may also see fewer bids as developers “conserve their resources for the new sites”, said Mr Nicholas Mak, executive director of research at SLP International.

On the other hand, competition for land could become more intense with the rising influx of foreign developers, analysts say.

Chinese developer MCC Land launched an executive condominium, The Canopy, in Yishun early last month.

Meanwhile, Japanese developers Sekisui House and Mitsui Fudosan have collaborated with local partners, a trend which will likely continue as this is the easiest way to break into a new market, analysts say.

“As foreign developers see less upside in their own home markets, they will be tempted to invest overseas,” said Mr Tan.

The rising Singapore dollar is also an attraction, as it translates into higher capital values for Singapore properties.

Allowing foreign developers to bid for land could also benefit home buyers.

“They could bring in new ideas. Greater competition could produce better products or lower prices for consumers,” said Mr Tan.

Source : Today – 26 Nov 2010

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