Choice GLS Sites Could Still Generate Interest

Source : The Business Times, June 20, 2008

Market conditions may lead to more developers bidding 'opportunistically', says Chesterton

The Government Land Sales (GLS) programme for H2 2008 has been released, with several new choice sites identified, including those at Dakota Crescent and Serangoon Avenue 3. And with land prices expected to be more attractive, the momentum of land sales could still be maintained.

While no sites on the reserve list were triggered from the H1 2008 GLS programme, four non-landed sites on the confirmed list were sold, with a further two sites tendered and pending award.

And compared with the eight sites that were awarded from the H2 2007 GLS programme, of which five were from the confirmed list, it would appear that the global economic slowdown has not stopped developers from buying land, as long as the price is right.

For the H1 2008 GLS programme, a site at Choa Chu Kang Drive was awarded to the highest bidder with a bid of $203 per square foot per plot ratio (psf ppr), even though market expectations were higher at between $230 and $270 psf ppr.

Chesterton International head of research and consultancy Colin Tan believes that current market conditions could lead to more developers bidding 'opportunistically'.

So far, a site at Choa Chu Kang Road was not awarded this year because the top bid of $162.40 psf ppr was considered too low. Also this year, a landed housing site at Westwood Avenue was not awarded for similar reason.

But pinpointing the bottom in terms of property prices will not be easy. Mr Tan said: 'Prices are weakening but not in a great way because the volume is low.'

Mr Tan reckons that apart from the sites mentioned, the site at New Upper Changi Road also looks attractive, not least because it has been carried over from the previous reserve list and is now on the confirmed list.

The Urban Redevelopment Authority (URA) also revealed how keen it is to sell the site when it said in a statement yesterday that the sale of the site 'will expedite the development of land around the (nearby) Rapid Transit System station(s) and help to increase the ridership catchment for the rail system'.

Knight Frank estimates that this site could eventually fetch bids of between $240 and $280 psf ppr.

Interestingly, the URA also demonstrated that it was prepared to expedite the sale of sites when it repackaged a reserve list site on Yio Chu Kang Road and put it on the confirmed list after saying it had 'received market feedback that a larger residential site with a small component of commercial space is more attractive than the original smaller commercial and residential site with a limited number of residential units'.

The forthcoming site at Dakota Crescent, which is expected to be available in November, is likely to receive a lot of interest too, especially as it is close to the new urban hot spot - Kallang Riverside - as identified in the Draft Master Plan 2008.

It is also next to Dakota Residences, which is being built on a GLS site that was awarded in June 2007 for $524 psf ppr.

Saying that there could be an investment opportunity here, Knight Frank director (research and consultancy) Nicholas Mak said that given the current market conditions, the new Dakota Crescent site (from GLS H2 2008) will likely be lower compared with the land price for Dakota Residences.

Interestingly, Mr Mak said that the profit margins need not necessarily be slimmer now. 'The market could pick up over the next two years. Developers may also be factoring in a higher profit margin to compensate for the higher risks today.'

Also favouring the Dakota Crescent site as a 'top pick' is Savills Singapore director (marketing and business development) Ku Swee Yong, who believes that bids for the site when it is launched eventually could be between $350 and $400 psf ppr.

'Given the current market conditions, developers are prepared to err on the side of caution,' he added.

However, Mr Ku did also pointed out that much will depend on how well Dakota Residences does when it is launched soon. The indicative launch price is said to be around $950 psf.

Another plum site is a white site at Jurong East Street 13, in what is expected to be a new sub-metropolitan centre called Jurong Gateway.

The site can yield an estimated 385 residential units, but the URA has also stipulated that 63,840 square metres of space must be set aside for commercial use.