http://www.straitstimes.com/archive/...ating-20140913

China developers' interest heating up

In Potong Pasir site tender, six offers came from Chinese players

Published on Sep 13, 2014 12:41 AM

By Cheryl Ong


Participation from Chinese developers is gathering pace if a tender for a Potong Pasir plot last month is anything to go by.

While it may mean a smaller share of the pie for local dvelopers, foreign competition can help raise competitiveness in the market, industry experts said.

In the tender for a 1.6ha commercial and residential site in Meyappa Chettiar Road, six offers came from Chinese players.

The mainlanders also led the competition with the highest four bids in a 15-way tussle.

MCC Land, a unit of the Metallurgical Corporation of China, pipped the competition for the prize with a top offer of $471.6 million - or $775 per sq ft (psf) per plot ratio (ppr). This was just 2.4 per cent more than the bid of $460.4 million - or $757 psf ppr - from Best Desire Investments, said to be controlled by Hong Kong's richest man Li Ka-shing.

Other Chinese contenders include a unit of the Nanshan Group based in Shandong and state-owned Greenland Group, according to earlier reports.

The involvement of Chinese developers here, though not unprecedented, is in part driven by tightened policies in the real estate market and frothy property prices back home, experts said.

After rising continuously since June 2012, prices of new homes in 100 cities in mainland China fell by 0.6 per cent in August for a fourth straight month, according to data from the China Index Academy.

"The attraction of overseas expansion is, in business speak, a lateral growth opportunity to help diversify their risks," said Dr Chua Yang Liang, head of South-east Asia research at Jones Lang LaSalle.

The pockets of Chinese developers are comparably deeper than developers here, said Mr Ong Kah Seng, director of R'ST Research, which could force local players to pay "hefty" prices or forgo a site. One reason is the availability of more financing options.

"If (Chinese developers) are able to have better access to ready financing, they can bid higher and provide projects with premium designs," said Mr Ong.

In a tender for a plum plot in Mount Sophia last September, a unit of Chinese firm Fantasia Holdings Group lodged the second-highest bid of $442 million with a Singapore-based private equity firm F&H Fund Management, just 0.06 per cent below the top bid from a consortium of Hoi Hup Realty, Sunway Developments and SC Wong Holdings.

Mr Nicholas Mak, research head of SLP International, noted that foreign developers compete in Government Land Sales tenders on the same terms as local players, which has resulted in more demand for land. This, he said, could either shore up the high land prices here, or at the very least, slow any decline.

However, foreigners will be penalised if they do not build and sell all the units within five years of buying the site.

Mr Ong believes their participation here gained momentum in 2010, after Qingdao Construction, part of the Qingjian Group, clinched a site in Pheng Geck Avenue for $113.7 million - now being developed into Nin Residence.

Other names that have become familiar in state land tenders in the past few years include Kingsford Development, whose 512-unit Hillview Peak has sold 161 units so far.

However, Mr Mak pointed out that the significant Chinese interest that emerged during the Meyappa Chettiar Road tender could have been due to the site's attributes, as mixed-use sites next to an MRT station are hard to come by.

"Foreign developers could just be cherry picking," he said.

"At the end of the day, they can't bid too aggressively all the time because they need to make a profit too."

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