reporter2
19-11-12, 17:00
http://www.straitstimes.com/archive/friday/premium/money/story/developers-keen-shorter-lease-site-20121116
Developers keen on shorter lease site
Top bid of $73.8 million received for 60-year lease
Published on Nov 16, 2012
By Cheryl Lim
A RESIDENTIAL site that comes with a shorter-than-normal lease has attracted a surprising 23 bids.
It was the best response for a site in recent years but fell short of the 32 offers received for a Westwood Avenue residential plot in December 2009.
The 1.02ha site in a private estate in Upper Bukit Timah's Jalan Jurong Kechil neighbourhood was offered for sale with a variable lease option of 30, 45 or 60 years.
It can be developed into a condominium, flats or retirement housing.
The top bid of $73.8 million for a 60-year lease came from the Aspial Corporation subsidiary World Class Developments. This translates to a price of $482 per sq ft per plot ratio (psf ppr).
Bigger developers were noticeably absent from the tender exercise while smaller players like Chip Eng Seng and Roxy Pacific Holdings were in the fray.
The lowest bid came from Kwan House with $23.3 million. It was also the only developer to tender for a 45-year lease. No bids were received for a 30-year lease.
Despite the shorter-than-usual lease, analysts expect that completed units could go for a selling price of $900 to $1,100 psf.
These prices are still lower than 99-year leasehold properties in the vicinity.
ERA Realty key executive officer Eugene Lim noted that one-bedroom apartments at the nearby Suites at Bukit Timah are going for $1,600 psf.
Mr Ong Teck Hui, national director for research and consultancy for Jones Lang LaSalle, said most buyers are less keen on properties with shorter leases because of concerns over long-term value depreciation.
But many analysts agreed that the strong interest from developers indicates market confidence that homes with shorter leases will still sell.
This site has been on the market for a couple of years. It was released in 2006 with a 30-year lease, and earmarked by the Government for retirement homes.
But the site failed to find any takers because developers said the lease was too short for a viable project.
The Jalan Jurong Kechil site was then made available for tender through the reserve list system earlier this year. It was put up for public tender after a developer committed to bid at least $24 million. This is the first time the Government had made land available with the development option of retirement homes.
In the event the site is developed for retirement housing, analysts say it will be an an untested segment of the real estate market.
DWG's senior manager of training, research and consultancy, Mr Lee Sze Teck, said a firm taking the risk on retirement homes now might reap benefits later.
"They could have a first-mover advantage in this retirement home property segment," he said.
Mr Nicholas Mak, SLP International's head of research, noted that the developer could face problems if buyers cannot find banks prepared to finance shorter leases of up to 60 years.
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Developers keen on shorter lease site
Top bid of $73.8 million received for 60-year lease
Published on Nov 16, 2012
By Cheryl Lim
A RESIDENTIAL site that comes with a shorter-than-normal lease has attracted a surprising 23 bids.
It was the best response for a site in recent years but fell short of the 32 offers received for a Westwood Avenue residential plot in December 2009.
The 1.02ha site in a private estate in Upper Bukit Timah's Jalan Jurong Kechil neighbourhood was offered for sale with a variable lease option of 30, 45 or 60 years.
It can be developed into a condominium, flats or retirement housing.
The top bid of $73.8 million for a 60-year lease came from the Aspial Corporation subsidiary World Class Developments. This translates to a price of $482 per sq ft per plot ratio (psf ppr).
Bigger developers were noticeably absent from the tender exercise while smaller players like Chip Eng Seng and Roxy Pacific Holdings were in the fray.
The lowest bid came from Kwan House with $23.3 million. It was also the only developer to tender for a 45-year lease. No bids were received for a 30-year lease.
Despite the shorter-than-usual lease, analysts expect that completed units could go for a selling price of $900 to $1,100 psf.
These prices are still lower than 99-year leasehold properties in the vicinity.
ERA Realty key executive officer Eugene Lim noted that one-bedroom apartments at the nearby Suites at Bukit Timah are going for $1,600 psf.
Mr Ong Teck Hui, national director for research and consultancy for Jones Lang LaSalle, said most buyers are less keen on properties with shorter leases because of concerns over long-term value depreciation.
But many analysts agreed that the strong interest from developers indicates market confidence that homes with shorter leases will still sell.
This site has been on the market for a couple of years. It was released in 2006 with a 30-year lease, and earmarked by the Government for retirement homes.
But the site failed to find any takers because developers said the lease was too short for a viable project.
The Jalan Jurong Kechil site was then made available for tender through the reserve list system earlier this year. It was put up for public tender after a developer committed to bid at least $24 million. This is the first time the Government had made land available with the development option of retirement homes.
In the event the site is developed for retirement housing, analysts say it will be an an untested segment of the real estate market.
DWG's senior manager of training, research and consultancy, Mr Lee Sze Teck, said a firm taking the risk on retirement homes now might reap benefits later.
"They could have a first-mover advantage in this retirement home property segment," he said.
Mr Nicholas Mak, SLP International's head of research, noted that the developer could face problems if buyers cannot find banks prepared to finance shorter leases of up to 60 years.
[email protected]