First GLS tender closing since new cooling measures in July. Is the situation as bad as what market watchers think?

This week, there were 3 government land sales tenders closing and these were the first batch of tenders that closed since the government announced the new cooling measures in July.

How were the responses to these tenders?

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Condo site at Jalan Jurong Kechil

There were only 3 tender bids received for the site at Jalan Jurong Kechil and this is one of the lowest in recent times. The low number of bids received reflect the general pessimism amongst Singapore property developers. Some developers may have decided to sit out of the land tenders, in view of the weakened market sentiments.

The highest price of S$1,002 psf ppr from CSC Land and COHL Singapore seems aggressive. Earlier this year, Kismis View, a nearby 99-year condominium development, was collectively sold to Roxy Pacific and Tong Eng Group for S$941 psf ppr. The bid from CSC Land was 6.5% higher than the price paid for Kismis View.

There was a wide disparity in the tender bids submitted. Second highest bidder – Hao Yuan Investment submitted a bid of S$764 psf ppr, which was 23.8% lower than CSC Land’s bid. The lowest bid came from Sim Lian Holdings, which offered S$606 psf ppr for the site (39.5% lower than CSC Land’s bid).

 

Condo site at Dairy Farm Road

The highest tender price of S$830 psf ppr from United Engineers is 22.2% lower than the S$1,067 psf ppr that Hong Leong Group recently paid for a nearby GLS site at Hillview Rise but the large price differential is likely to be a reflection of the differences in selling prices in the 2 area.

The Dairy Farm Road site is located further away from the Hillview MRT Station and some of the nearby condominiums in the area include Tree House, Foresque Residences and Eco Sanctuary. A 2-bedroom 797 sq ft high floor unit at Tree House was recently transacted at S$855,000 or S$1,073 psf.

The Hillview Rise site is located nearer to the Hillview MRT Station, with supporting retail amenities nearby – HillV2 mall. Some of the nearby condominiums in the area include The Hillier and Kingsford Hillview Peak. At Kingsford Hillview Peak, a 2-bedroom 829 sq ft high floor unit was recently transacted at S$1.2 mil or S$1,448 psf.

The difference in pricing implies that residential properties on the Hillview side could potentially sell at a premium of 30% to 40% above the prices of properties on the Dairy Farm Road/Petir Road side. This is a likely reason for the wide difference in the tender prices between the GLS sites at Dairy Farm Road and Hillview Rise.

The tender bid submitted by CSC Land for the Dairy Farm Road site also supports this view. CSC Land had also participated in the earlier tender for the Hillview Rise site, submitted a bid of S$935 psf ppr for the site. In comparison, the tender bid of S$804 psf ppr submitted by CSC Land for the Dairy Farm Road site was 14% lower than its bid for the Hillview Rise site. CSC Land has continued to bid aggressively for land since the recent cooling measures. Hence, the lower bid for Hillview Rise site is unlikely to be a reflection of the group’s conservatism towards land acquisition, but more likely to be a reflection of the weaker attributes of the site in comparison to the Hillview Rise site.

This government land sales officially marks the return of United Engineers to the residential development scene in Singapore. The last residential development by United Engineers was in 2012 when it launched 8 Riversuites in District 12.

It is evident that sentiments among property developers have weakened and this is reflected in the fewer number of tender bids received. Prior to the introduction of cooling measures, there are usually around 10 bids received for GLS tenders on average. For this Dairy Farm Road land tender, there were only 5 bids. Some developers may have decided to sit out of the land tenders, in view of the weakened market sentiments.

 

Executive Condominium site at Canberra Link

The highest tender price of S$558 psf ppr from Hoi Hup & Sunway is 4.3% lower than the record price of S$583 psf ppr paid by CDL and TID for the Sumang Walk EC site. Nonetheless, the tender price for the Canberra Link EC site is still very aggressive if we take into consideration the differences in executive condominium pricing in the 2 areas. Sumang Walk EC site is located in the North-east region and Canberra Link EC site is located in the North region.

In the North-east region, Rivercove Residences, an Executive Condominium development launched in April 2018 (another development by Hoi Hup & Sunway), achieved an average selling price of S$975 psf. In the North Region, Parc Life, an Executive Condominium developed by Frasers, was selling at an average selling price of S$850 psf this year.

Hence, the lower land price for the EC site at Canberra Link reflects the discount in the average selling price of executive condominium in the North, compared to the North-east region.

At the tender price of S$558 psf ppr, the estimated breakeven selling price of the development will be around S$900 to S$950 psf and the expected launch price should be around S$1,000 psf to S$1,050 psf. This is a 10.5% to 17.6% increase in the selling price of executive condominium in the area (using Parc Life as a reference).

Demand for this site is relatively strong in comparison to the number of bids received for the other 2 residential sites, but it was not as strong if we compare it to the last EC tender for Sumang Walk site. A total of 9 bids were received for the Canberra Link EC site, less than the 17 bids for the Sumang Walk site. All 9 tenderers for the Canberra Link EC site participated in the Sumang Walk EC site tender back in Feb 2018.

However, several developers and consortiums that submitted bids for the Sumang Walk EC site were missing in this Canberra Link EC tender – 1) Yanlord/Soilbuild consortium; 2) Sing Holdings/Far East Consortium/Koh Brothers; 3) Frasers Property/Keong Hong; 4) Nanshan Group; 5) GuocoLand; 6) Amara/Santarli/Kay Lim; 7) MCL Land; and 8) Ho Bee Land. This could be attributable to a more conservative land acquisition approach by these developers after the July cooling measures. It is also possible that some of these developers might have preferred to tender for the other EC site at Anchorvale Crescent instead. Tender for the Anchorvale Crescent EC site will be closing on 14th Sep.

 

What does the latest round of GLS tender tell us?

Firstly, the absence of several property developers which had been active in GLS tenders prior to cooling measures, as well as the decrease in the number of bids reflect the general cautious sentiments among most property developers in replenishing their land bank. No surprise here.

But this is unlikely to be a doomsday scenario yet. Some developers, especially those that had not replenished their landbank, may view this as an opportunity for them to acquire new sites at more reasonable prices. Both CSC Land and United Engineers had not acquired sites during the 2017/18 collective sale cycle and both companies managed to secure new development in the absence of fierce competition. This will sustain some interests in land acquisition activities but developers are likely to remain conservative in their offer prices for land as they factor in higher development risks when bidding.

Executive condominium seems to be the only bright spot in the residential property market. EC sites continue to be highly sought-after by developers. The existing stock of EC units in the market is almost fully sold. With the recent property cooling measures, executive condominium sites are looking even more attractive for developers. But, with the next round of EC launches likely to hit prices of S$1,000 psf to S$1,100 psf, which is close to some of the new condo launches, I’m just wondering how sustainable this will be.

Who knows, maybe the Government may be targeting the EC market next?

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Why the 1H18 Government Land Sales announcement can be good for the market

This morning, the Ministry of National Development released the Government Land Sales (GLS) Programme for the first half of 2018. There were just 6 confirmed list sites and 9 reserve list sites announced for 1H 2018. These sites could yield about 8,045 new units and 63,960 sqm of commercial space.

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GLS RL

Despite the strong demand for development sites by developers, the government decided to keep the total supply of units for 1H2018 at about the same level as the supply of units from the 2H2017 GLS Programme. This is also in contrary to what many analysts had earlier expected.

In SPK’s opinion, there are 2 different possible approaches that the government could have taken in handling the current demand for sites in the property market. One approach is to for the government to be more pro-active and interfere in the market. The government can release more development sites via GLS to developers to meet their demand for land and cool down the collective sales market. Another approach is to be reactive, keep to the existing GLS policy and let the property market and developers to find an equilibrium on their own. Looks like the government has chosen the latter approach to deal with the current collective sales fever.

Could the lack of interference by the government send further positive signals to the property market that it is still not the time for the government to interfere yet?

Who’s who at GLS Tender?

Two Government Land Sale tenders for sites at Jiak Kim Street and Fourth Avenue were concluded yesterday. Without surprise, the sites saw keen interests from developers, with the site at Jiak Kim Street setting a new benchmark.

 

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Site at Jiak Kim Street

 

Let us look at the different groups of bidders who were present at this round of GLS tender.

1. The Aggressor – Allgreen Properties

After snatching up Royalville and Crystal Tower last week for S$478 mil and S$181 mil, Allgreen Properties is back on the headlines again with the highest tender price of S$553 mil or S$1,540 psf ppr for the site at Fourth Avenue. What a shopping spree! Within 2 weeks, Allgreen Properties has invested S$1.2 billion in 3 development sites!

This is probably not going to be the end of Allgreen Properties’ acquisition spree yet. Allgreen Properties also put in a bid of S$926 mil for the site at Jiak Kim Street, but it lost out to Frasers Centrepoint’s top bid of S$955 mil. Seems like Allgreen Properties still has appetite for more acquisitions and having lost out in the bid for Jiak Kim site, it will now have another S$1 bil to spare for other sites.

2. The Aggressor 2 – CDL/Hong Leong

Hong Leong came close to winning the tender for the site at Jiak Kim Street. Its tender price was only S$5 mil short of the winning tender price from Frasers Centrepoint. Its sister company, City Developments also joined the bidding with Logan Property. For the site at Fourth Avenue, Hong Leong and CDL went in together with a bid that was just 4% short of the winning tender price from Allgreen Properties.

So far, Hong Leong and CDL have only managed to clinch one site this year – Amber Park through collective sales. In these 2 GLS land tender, Hong Leong and CDL were not too far off from the winning tender prices and they appear to have good appetite for further land acquisitions. We might see more actions from Hong Leong and CDL in upcoming GLS and collective sales, particularly in the prime districts.

3. The Conservative Aggressors – Frasers Centrepoint, Bukit Sembawang, UOL/UIC

Frasers Centrepoint, Bukit Sembawang, UOL and UIC seem to have exercised some form of risk management in their aggressive pursuit of land. Frasers Centrepoint came in with the highest tender price for the Jiak Kim site, whilst UOL/UIC was not too far behind Frasers Centrepoint in its tender price. Bukit Sembawang came in second in the tender for the Fourth Avenue sites. All 3 developers were selective in their bidding and only participated in one out of the two available site tenders.

4. The Dreamer – Wheelock Properties

With a tender offer that is 23% below the winning bidder and 13% below Guocoland, the second lowest bidder for the Jiak Kim site, maybe it is time for Wheelock Properties to revisit its bidding strategy and plans?

5. The Absentees – Foreign Developers

Only 3 foreign developers – China Overseas Holdings/CSC Land, Logan Property and Cheung Kong Properties, participated in the tenders for the 2 sites.

Where were the other foreign developers?