Wednesday, August 13, 2008

Solitary, Low Bid For Tampines Site

Source : The Business Times, August 13, 2008

At $118 psf ppr it is below expectations, but analyst says site is not plum anyway

Cautious sentiment, soaring construction costs and a not-so-hot site all combined to yield just one bid at a state tender yesterday for a 99-year leasehold condo site at Tampines Ave 1/Ave 10 facing Bedok Reservoir.

The sole bid of about $118 per square foot per plot ratio (psf ppr) was below general market expectations which ranged from $150 to $230 psf ppr.

The sole bidder at yesterday's tender was Boon Keng Development, a unit of Midview group, which is involved in the construction and property businesses.

Most property consultants reckon there's only a slim chance of the site being awarded.

Looking at the $118 psf ppr sole bid at yesterday's tender, property consultants told BT that no 99- year leasehold condo/ apartment site has been sold at a lower price than this since 1991.

Yesterday's top bid, which was for a private condominium site, was also below the $137 psf ppr at which the government sold a Design, Build and Sell Scheme site in Simei for development into Housing & Development Board flats in June.

'This outcome is negative for property market sentiment. It may be even worse for sentiment if the government actually awards the site as that could affect land valuations for other residential sites too,' Knight Frank director (research and consultancy) Nicholas Mak said.

However, Savills Singapore director (marketing and business development) Ku Swee Yong noted that the Tampines site was not a plum one to begin with.

'It does not have good attributes in terms of transportation links. Neither is it near major amenities,' he said.

'Generally, developers already have good landbanks, so unless a very good site comes along, we'll not see too much participation,' Mr Ku said.

'But if a site with solid transportation connection and amenities comes up, like the Ophir Road white site or the condo plot next to Tanah Merah MRT station, these will be attention grabbers,' he added.

The tender for the Tanah Merah plot closes on Sept 9 while that for the Ophir Road plot closes in December.

The $118 psf ppr bid for the Tampines plot, plus construction costs of about $320-350 psf of gross floor area, reflects a breakeven cost of about $500-550 psf for a new condo project.

Units in completed condos around the Bedok Reservoir area have been selling at between $550 psf and $680 psf, although the new Waterfront Waves condo which is being built on a choice spot along the reservoir has achieved average prices of about $750 psf for pool-facing units and $800 psf for reservoir-facing units.

The latest plot on Tampines Ave 1/Ave 10 can be built into a condo with about 650 units. It was offered through the confirmed list of the Government Land Sales Programme.

Debating the likelihood of the plot being awarded, a property consultant who declined to be named said: 'There was just one bid. But I hope the government will award this site if it wants to show foreign investors that Singapore is a competitive place to invest in.'

Knight Frank's Mr Mak said that the government will gradually lower reserve prices for sites offered through the Government Land Sales Programme, to take into account rising construction costs and weak property market sentiment.

'It's walking on a tight rope. The government can't trim reserve prices too much as that may send a negative signal to the market; besides it also has to protect the nation's reserves. But on the other hand, if the reserve prices are maintained too high and sites can't be awarded at state tenders, the government may not be able to ensure a steady state of supply to avoid busts and booms in the property market,' Mr Mak said.

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