Modest top bid of $141 million shows developers cautious amid global economic turmoil

AN UNUSUALLY strong field of 13 developers slugged it out in a close fight for a Pasir Ris residential site, in contrast to the recent tepid response to land tenders.

Still, the top bid – from a Hoi Hup Realty consortium – was not particularly high.

The bid came in at $141 million, which translates to $361 per sq ft per plot ratio (psf ppr).

The 99-year leasehold site is at the junction of Jalan Loyang Besar and the yet-to-be completed Pasir Ris Rise.

The top bid’s $361 psf ppr price is 10 per cent lower than an adjacent site at the junction of Jalan Loyang Besar and Pasir Ris Drive 4; this site sold for $403 psf ppr in May.

Market experts say worries about the global economy have led developers to be more selective about which sites to bid for – and to offer more cautious bids.

The last time a government land sale site attracted this much attention was in August, when 15 parties tendered for a residential site in Upper Serangoon Road. Tuan Sing Holdings clinched that particular site for $185 million.

Credo Real Estate’s head of research Ong Teck Hui said the high level of interest could indicate that developers felt there would be less competition for the Pasir Ris Rise site.

They might, therefore, have gone in with cautious bids, he said. The lowest nine submissions for this tender exercise ranged from $308 psf ppr to $205 psf ppr, reflecting this strategy.

The top bid was only 1.6 per cent more than the second highest offer of $139 million and 3.2 per cent higher than the third highest of $137 million.

The response may have been spurred by the continuing demand for mass market homes, said Colliers’ head of research and advisory Chia Siew Chuin.

Ms Chia said this sentiment could have been supported by the primary sales activity and price rises of private non-landed homes in suburban areas in recent months.

Another possibility, said Mr Li Hiaw Ho, CBRE Research’s executive director, is that developers feel residential land supply in Pasir Ris is more limited than other areas like Punggol and Sengkang.

In those areas, many land sites have been earmarked for development.

‘In addition, it shows that developers are confident of residential demand going forward, (demand from the upgrader segment) in particular,’ said Mr Li.

The site measures 185,938 sq ft and can be built up to a maximum gross floor area of 390,472 sq ft.

It is a 10-minute walk from Downtown East. Other amenities such as the White Sands shopping mall and Pasir Ris MRT station and bus interchange are a little further away.

However, Pasir Ris Park and the beach are close enough to walk to, a feature of the area on which Hoi Hup intends to capitalise, should it be awarded the tender.

A Hoi Hup spokesman said the new condominium development would be designed to ensure a sea view for as many of the units as possible.

The development will consist of six blocks, each up to 13 storeys high, yielding 400 apartments. This new project could be launched for sale in as little as nine months.

CBRE’s Mr Li noted that homes at nearby Seastrand are being marketed at an average of $930 psf, adding that more than 80 per cent of the condo’s 473 units have been sold as of the third quarter.

Units at another nearby project – NV Residences – were selling at an average price of $840 psf between July and September.

NV Residences, launched a year ago, consists of 642 units. Around 95 per cent of these homes have been sold to date, said Mr Li.

Industry observers say the $141 million bid for the Pasir Ris Rise site would translate to a breakeven cost of about $750 psf, with some analysts predicting the new condo development could launch at around $900 psf.

Source: Straits Times, 5th Oct 2011