http://www.businesstimes.com.sg/sub/...25540,00.html?
Published January 10, 2012
All eyes on GLS tenders for condo sites
Developers will be cautious but remain fleet-footed if sentiment improves
By KALPANA RASHIWALA
(SINGAPORE) As the first Government Land Sales (GLS) tender for a 99-year leasehold private condo plot for 2012 closes today for a site at Mount Vernon Road near Bartley MRT Station, expectations are running high that the cautious bidding seen during the last state tender closing in 2011 (at Punggol Place) will continue.
The Punggol tender, which closed on Dec 15, a week after the latest property cooling measures were announced on Dec 7, drew 13 bids but big property developers were mostly absent. The top bid by Wee Hur Development of about $354 per square foot per plot ratio (psf ppr) was 12.8 per cent shy of the $406 psf ppr paid for the nearby site a year earlier that is currently being developed into A Treasure Trove condo.
If this pattern continues, today's tender may similarly see the top bid lower than the $620.61 psf ppr that a nearby plot next to Bartley MRT Station fetched in March last year.
To begin with, the latest site is not as coveted as the earlier plot, which is right next to the MRT station and surrounded by a landed housing estate, as a seasoned developer points out. The current plot is in a more mixed sort of environment, surrounded by Bartley Secondary School, SPCA and the Gurkha Cantonment. Also likely to temper developers' bids at today's tender is the more cautious bidding climate - given Singapore's weaker economic outlook in 2012 and the Dec 7 cooling measures.
Starting Dec 8, a 3 per cent additional buyer's stamp duty (ABSD) became payable by permanent residents purchasing their second and subsequent residential property and by Singaporeans buying their third and subsequent residential property. The ABSD is set at 10 per cent on any private homes here bought by foreigners.
Most analysts expect the ABSD to clip foreign buying and demand for investment homes. This, in turn, will soften the prices at which developers can sell their projects. Another reason for developers to temper their land bids is the new five-year limit the government has set for developers buying residential sites from Dec 8 to finish building their project and, more critically, to sell all the units in the project - if they want to avoid paying a 10 per cent ABSD.
From a developer's standpoint, there's less room to price projects aggressively as there is a risk of being stuck with a substantial number of unsold units at the end of the five years. To be on the safer side, developers will be more cautious in formulating land bids.
The cumulative supply building up from previous Government Land Sales sites will also weigh on developers' minds when buying land.
Even before the Dec 7 cooling measures, there was evidence that private home prices were plateauing, as seen in the 0.2 per cent quarter-on-quarter increase in the Urban Redevelopment Authority's private home price index for Q4 2011. This was based on transactions in the first 10 weeks of the quarter, which would be till Dec 10.
So logically, all the signs point to developers pricing their bids cautiously at GLS tenders this year.
But then, sentiment can be a very fickle thing. If for instance after an initial standoff, buyers return to showflats in large numbers or there's some other positive newsflow, some developers could feel hungrier for land.
Last year saw demand adjusting to the 'new normal' fairly soon after shocks such as the US debt timebomb, eurozone crisis and the stockmarket tanking in July/August.
On Aug 11 last year, a tender for a site at Pheng Geck Avenue next to Potong Pasir MRT Station received a top bid by Tuan Sing which was 6.6 per cent lower than the price that Qingdao Construction had paid in June 2010 for the neighbouring Nin Residence plot.
The trend was also visible at a September tender, when a plot at Upper Serangoon Crescent was sold at lower than prices for comparable sites three months and 10 months earlier.
By October, developers had grown more confident, with top bids for 99-year leasehold private condo plots at state tenders once again surpassing the prices for comparable sites sold in 2010, as an analysis by Credo Real Estate shows.
The year ahead could prove challenging for crystal ball gazers.
Reply With Quote
Originally Posted by mcmlxxvi
