Developers’ Unabating Land Appetite

Two Tender Closings

Developers’ appetite for land shows no signs of cooling despite warnings from the authorities of over-exuberance in the property market.

Two residential sites, at Fourth Avenue and Jiak Kim Street under the Government Land Sales (GLS) programme, saw a keenly fought contest, with Frasers Centrepoint Limited (FCL) setting a new benchmark price for the Jiak Kim Street parcel.

This 13,482 sq m parcel at Jiak Kim Street is the former site of popular nightspot Zouk, and is zoned for commercial use on the first floor.

FCL topped 10 bidders with its SGD$955.41 million tender price, that works out to SGD$1,733 per square foot per plot ratio (psf ppr). This is the highest rate ever achieved for both a pure residential GLS site and a residential with commercial at the first storey site.

It is also a hefty 39.9% jump from the last high of SGD$1,239 psf ppr that GuocoLand paid for a nearby site at Martin Place last June, where it is developing Martin Modern.

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Robert Kuok’s Allgreen Properties, having already scooped up two collective sale sites at Bukit Timah last week, topped the bids for the Fourth Avenue site at SGD$552.96 million.

It beat out six other bidders with a bullish land rate of SGD$1,540 psf ppr. But this is still lower than the benchmark price it had already set in that area, with its en bloc purchase of Royalville for SGD$1,960 psf ppr last week.

These two 99-year leasehold sites were originally on the Reserve List of the GLS programme, but were triggered for public tender after the government received minimum acceptable bids for them.

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Despite the authorities highlighting the risk of over exuberance in the property market, bidding for choice sites has not shown any signs of abating.

Based on the average SGD$2,343 psf selling price for Martin Modern in October, FCL is likely to price in a slight appreciation of up to 6% to 7% for the future development.

The toppish bids for Jiak Kim Street came on the back of limited development sites in the area, its attractive location, and brisk home sales nearby.

Half of the 10 bidders submitted bids within a tight range for the Jiak Kim Street site. FCL’s bid came in at only 0.6 per cent above the 2nd highest bid by Hong Leong Holdings and Hong Realty, headed by Singapore tycoon Kwek Leng Beng.

Citing the strong locational attributes of the site, Frasers Centrepoint’s CEO Christopher Tang said that it is “a rare location in a cosmopolitan locale, filled with rich heritage and character, sitting right on the edge of the Singapore River”.

As the site comes with three conservation warehouses built around 1919, FCL will be exploring sustainable ways to adapt these iconic structures for lifestyle and creative commercial uses, he said. The developer will also have to use the Prefabricated Prefinished Volumetric Construction (PPVC) method for the development.

Market watchers feel that the record price that Allgreen paid for Royalville could have deterred some developers from bidding for the Fourth Avenue site. Hence there were only 7 bidders for it.

The new development may have to sell at around SGD$2,250 psf, assuming profit margin of about 10 per cent.

Despite the keenly fought contests, the batching of tenders for the 2 sites may have helped spread the competition for each, taming the bids somewhat. This is the first time since May 2017 that a GLS tender has attracted less than 10 bids.

Interestingly enough, local developers have maintained their hold on the prime district market, pipping foreign developers such as Hong Kong tycoon Li Ka-shing’s Japura Pte Ltd and China’s CSC Land, for the sites at Fourth Avenue and Jiak Kim Street, respectively.

For the first time too, Singapore-listed City Developments Limited (CDL) and Hong Kong-listed Logan Properties, joined forces to bid for land here. They came in 6th for the Jiak Kim Street site.

Source: The Business Times . 6 December 2017

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