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Thread: Developers mind the gap in bids for land

  1. #1
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    Default Developers mind the gap in bids for land

    http://www.businesstimes.com.sg/sub/...12325,00.html?

    Published November 9, 2010

    Developers mind the gap in bids for land

    As caution sets in, the difference between winning bids and the rest starts to narrow

    By KALPANA RASHIWALA


    (SINGAPORE) Developers looking to build homes are no longer bidding with wild abandon at Government Land Sale tenders as the impact of the property cooling measures kicks in.

    This can be gauged from the fact that the gap between the top bidder and next highest bid for residential sites and sites with residential components has started to narrow.

    The gap peaked in August and early September before declining in recent weeks as the impact of the Aug 30 measures gradually took effect, according to an analysis by Jones Lang LaSalle.

    The gap (measured by the difference between the top two bids divided by the second highest bid) peaked at 31 per cent for the condo plot at Miltonia Close next to Orchid Country Club in the Yishun area offered at a tender which closed in August.

    Another tender that closed on Sept 1, a residential-commercial plot next to Bedok MRT Station, also saw a relatively high winning margin of 21 per cent.

    The trend persisted into early September, with a tender for a condo plot at Jalan Eunos/Foo Kim Lin Road drawing a 26 per cent winning margin from top bidder Far East Organization when it closed on Sept 7.

    Since then, the margin has slipped to single-digit per cent levels, mostly between one and 4 per cent. Between Jan 1 and July 31 this year, the winning margin ranged from one to 17 per cent, with the 17 per cent premium paid by a Far East Organization-Frasers Centrepoint tie-up for a private condo plot at Yishun Ave 2/Canberra Drive offered at a tender which closed in June.

    Market watchers suggest that the margin being at its widest in August and early September reflected the bullish sentiment prevailing in the property market at the time that led the government to rein in the market on Aug 30.

    JLL's South-east Asia research head Chua Yang Liang says: 'The trend of thinner winning margins reflects a more cautious stance by developers as a result of the latest anti-speculative measures.'

    When the market is bullish, a more optimistic developer may be willing to pay a higher premium than its competitors.

    But when developers turn conservative, there tends to be a greater consensus of views, including on land price, he added.

    Knight Frank chairman Tan Tiong Cheng said that the wide spread between the top two bids at land tenders back in August and early September reflected a divergence in views among developers.

    'Some were bullish while others were less so. Then came the Aug 30 measures and developers became more circumspect. Everybody seems to have become more careful, translating to less divergence in their market views and hence a much smaller winning margin at more recent tenders.'

    Agreeing, DTZ executive director (consulting) Ong Choon Fah said: 'Sentiment was generally bullish in August but there was also a lot of 'noise'.

    'People read the market differently as some were concerned about the government coming up with more steps to cool the property market. Since the government announced the measures, there is less uncertainty and hence greater consensus of views.'

    Knight Frank's Mr Tan says that another reason that winning bidders at state tenders have been less aggressive of late is that the Aug 30 measures were thought to have a greater impact on the upgrader market and the sites on the government land sales programme are mostly in this market segment.

    Mrs Ong reckons that the trend of a narrow winning margin could continue in the near future, but some sites will be hotly contested and their winning margins could again widen - for instance, smallish plots, as these will draw a bigger pool of contenders including boutique developers.

    Close to 14,000 private homes (including executive condominiums) are estimated to be generated from sites sold and to be sold under the government land sale programme this year.

    This figure includes 9,790 units that can be built on sites sold so far this year, and 3,470 units on seven sites that are pending - either the tenders have yet to close or have yet to be awarded.

    In addition, a site in Punggol Walk/Central that can be developed into 685 homes will be launched later this month.

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    By now most developers should have topped up their landbanks significantly enough to not overbid. Govt was releasing land like no tomorrow.

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    One can also interpret the statistics differently. Narrow gap can also mean the site is hotly contested and all serious bidders. Huge gap could also mean there are opportunistic bids (i.e. not serious).

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    yes but the narrow gap at a lower psf ppr vs before the cooling measures means at least that is closer to fair value.

    Quote Originally Posted by Wild Falcon
    One can also interpret the statistics differently. Narrow gap can also mean the site is hotly contested and all serious bidders. Huge gap could also mean there are opportunistic bids (i.e. not serious).

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    Quote Originally Posted by bargain hunter
    yes but the narrow gap at a lower psf ppr vs before the cooling measures means at least that is closer to fair value.
    Note that only 'closer in value' is true - cannot assume they are closer to FAIR value. What if all equally bullish?

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    The latest few bids are seeing the developers converge on a consensus of 350psf for ulu location. That's scant consolation if one was expecting the prices to cool down. Maybe I shall coin the term "cool up" to describe the situation we are experiencing now.

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    at least it stopped the hoi hup kind of bid at yishun and far east at eunos as mentioned in the article above.


    Quote Originally Posted by kane
    The latest few bids are seeing the developers converge on a consensus of 350psf for ulu location. That's scant consolation if one was expecting the prices to cool down. Maybe I shall coin the term "cool up" to describe the situation we are experiencing now.

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    equally bullish is fine. at least all agree that that is the market value at that time so i feel still pretty fair.


    Quote Originally Posted by mcmlxxvi
    Note that only 'closer in value' is true - cannot assume they are closer to FAIR value. What if all equally bullish?

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    Quote Originally Posted by bargain hunter
    equally bullish is fine. at least all agree that that is the market value at that time so i feel still pretty fair.
    Ok just hope not equally foolish lol.

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    Quote Originally Posted by bargain hunter
    at least it stopped the hoi hup kind of bid at yishun and far east at eunos as mentioned in the article above.
    there is always an equal likelihood that all these new kids on the block will at some point learn the lessons of overbidding like the battle hardened veterans such as wing tai, and more recently s c global.

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    Quote Originally Posted by Wild Falcon
    One can also interpret the statistics differently. Narrow gap can also mean the site is hotly contested and all serious bidders. Huge gap could also mean there are opportunistic bids (i.e. not serious).
    more like due to market sentiments and expectation from developers that land price will continue to go up before 30 Aug.

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    but as we have seen recently, when bullish its usually one or two heros while when all similar bids its more conservative so..........so far so good.

    Quote Originally Posted by mcmlxxvi
    Ok just hope not equally foolish lol.

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    wing tai got not much existing landbank... bid for land also everytime bid so low and cannot get.... they see these govt land sales in ulu location no up?

    wonder how they can stay in business in few years time?

    maybe they got to resort to buying enbloc in prime districts liao...

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    ho bee will be in a similar position once they complete their sentosa condos. that's why they have gone into commercial at one north and ventured into china with yanlord.

    Quote Originally Posted by Lord Anus
    wing tai got not much existing landbank... bid for land also everytime bid so low and cannot get.... they see these govt land sales in ulu location no up?

    wonder how they can stay in business in few years time?

    maybe they got to resort to buying enbloc in prime districts liao...

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    Quote Originally Posted by Lord Anus
    wing tai got not much existing landbank... bid for land also everytime bid so low and cannot get.... they see these govt land sales in ulu location no up?

    wonder how they can stay in business in few years time?

    maybe they got to resort to buying enbloc in prime districts liao...
    wing tai still has an apparel business to go back to. those small timers purely into property development will have nothing to eat. That's why you see guys like Ho Bee venturing into China.

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