State land auctions for private houses and EC plots receive a lower number of bids than anticipated

Sep 13, 2022



The majority of property experts had anticipated that the state tenders for two private home sites located near the Lentor MRT station and an executive condominium (EC) site located along Bukit Batok West Avenue 5 would get a larger number of bids than they actually did.

The top bids for the Lentor Central site came in at $1,108 per square foot per plot ratio, which was within the range of forecasts of experts surveyed before the tenders ended on Tuesday. The highest offer for the Lentor Hills Road Parcel B went for $1,130 per square foot per plot ratio (Sep 13). They were also more than the price of the nearest comparable site, which had been purchased in January for S$1,060 per square foot per plot ratio and which is going to be turned into the project known as Lentor Hills Residences.

In spite of this, the winning bid for the EC property in Bukit Batok came in at about S$626 psf ppr, which is 5.4% less than the winning bid of S$662 psf ppr that was submitted for the plot next door during the tender that was held in March.

It's possible that worries about a supply buildup in the Lentor region, as the authorities release more private house sites to spur the building of the new Lentor Hills Estate, stopped the majority of developers from taking part in the tenders for the two sites in the neighbourhood. However, many who keep an eye on the real estate market say the results of the state tender closings that took place on Tuesday may also reflect a growing sense of caution among developers.



"Growing interest rates, inflation, rising construction costs, and macroeconomic concerns in 2023 (when the projects may be launched) could be some considerations," said Ong Teck Hui, senior director of research and consultancy at JLL. "These factors could have a big influence on demand."

Ong made the following statement in response to the top bid for the EC plot located in Bukit Batok West Avenue 5, as well as the fact that it only drew a total of four bids, in contrast to the adjacent plot in March, which received a total of nine bids: "This shows some softening in sentiments in the outlook for the EC market." The most recent launch of an executive condominium building was North Gaia in Yishun in April. Of the 616 apartments available, 166 were purchased during the launch month at a median price of $1,301 per square foot (psf), but sales progress has been slow.

ECs are a hybrid kind of public and private housing that include eligibility requirements for the first buyers as well as resale conditions. These requirements are all lifted ten years after the project has been finished.

In a similar vein, Nicholas Mak, head of research and consultancy at ERA Singapore, stated that North Gaia is the only EC project that has a considerable amount of unsold apartments available. North Gaia is located in Singapore. There is a possibility that three further EC projects may be on the market for homeowners during the next 18 months.

Christine Sun, of OrangeTee & Tie, made the observation that certain developers may have refrained from submitting bids due to the fact that there would be a number of new ECs opening up in the area. These include the Copen Grand in Tengah Garden Walk, the new project in Bukit Batok West Avenue 8 (which is located next to the EC site that will be offered at the closing of the tender on Tuesday), and the future development that will be launched for sale on the Tengah Plantation Loop site in December.

There is a possibility that an increase in lending rates as well as an increase in building expenses have discouraged some developers. This is especially likely given the low profit margins associated with EC development.

"Developers are wary as the prices of new EC projects are nearing the top-end of the pricing range," said Mak of ERA. If developers were to introduce a new commercial property with prices higher than $1,300 per square foot (psf), the rate of sales would slow down dramatically because consumers would be reluctant to purchase the property.

He also mentioned that the difference between the highest and lowest bids for the EC plot at the most recent closing of the tender was relatively small, with the highest price being only 1.5% more than the lowest one. "This demonstrates that developers of ECs are confronting comparable cost structures for the construction of ECs and may not be able to significantly boost pricing," he went on to say in his conclusion.

According to his projections, the probable future launch price for the new project on the site would be somewhere in the range of S$1,280 to S$1,330 per square foot (psf).

By the hair's breadth

The highest bid for the property came from a wholly-owned subsidiary of City Developments called CDL Zenith. This price was just S$1.05 psf ppr more than the second-highest bid, which was submitted by Sim Lian Land and Sim Lian Development.

CDL group chief executive officer Sherman Kwek commented, "We are extremely happy to emerge as the top bidder for this fiercely fought EC site in Bukit Batok West, especially with such a thin margin of victory." The property in question was located in Bukit Batok West. It will benefit from easy access to a wide range of facilities, as well as strong connectivity to such a significant commercial, lifestyle, and tourism hub due to the site's closeness to the developing Tengah New Town and Jurong Lake District. We are excited about the prospect of redeveloping this huge property into a residential landmark that features eco-friendly architecture and quality construction.

The property is located at the intersection of Bukit Batok West Avenue 5 and Bukit Batok Road, which is directly across the street from the soon-to-be-built Tengah New Town. According to him, the Tengah New Town will feature conveniences such as a community club, a polyclinic, and an integrated bus interchange.

Lee Sze Teck, senior director of research at Huttons Asia, made the following statement in response to the low number of bidders for the two private housing sites in Lentor: "Participation was muted as expected, probably because some developers are cautious about an area where the government can offer up to 11 sites for development."

The land parcel along Lentor Central, which has the potential to produce approximately 470 private homes, attracted three bids, the highest of which was S$481.03 million, which is equivalent to S$1,108 per square foot per plot ratio. This bid was submitted by a consortium consisting of a subsidiary of China Communications Construction Company, Soilbuild Group, and United Engineers Developments.

Tanglin Land, which is owned and operated by CapitaLand Development, submitted a proposal that was over S$1,069 psf ppr, making it the second highest offer. GuocoLand and Intrepid Investments collaborated to submit the lowest offer of roughly S$1,038 per square foot per plot ratio.

The adjoining Lentor Hills Road Parcel B received just two offers, with the highest one being from TID Residential at S$276.36 million, which is slightly more than S$1,130 per square foot per plot ratio.

The consortium that consists of China Communications Construction Company, Soilbuild, and United Engineers Developments submitted the sole other offer, which was for S$950.06 per square foot per plot ratio. Approximately 265 single-family houses might be built on this piece of land.

First-mover advantage

The representative from ERA named Mak offered his opinion on the matter, saying, "The reason for the low tender participation rate (for the 2 Lentor plots) might be because some developers opted not to compete in the Lentor region with large developers like as GuocoLand and Hong Leong Holdings." GuocoLand has a financial interest in both the Lentor Modern and the Lentor Hills Residences condominium developments that are still in the planning stages. These two developments together have a total of 1,200 residential units. As a consequence of this, the developers of these two projects will have a large amount of pricing power inside the Lentor residential market.