ST : Suburban condo plots are red-hot

May 16, 2010

Suburban condo plots are red-hot

Developers and buyers are keenly eyeing heartland condos, possibly pushing prices to $1,000 psf again

By Joyce Teo

Can condos and HDB flats co-exist happily?

Property developers certainly think so, going by their high bids for state land for private housing, even if the plots are smack in the middle of an HDB estate.

Going by recent tender results, developers have no qualms paying a lot more, if the sites in these established or up-and-coming HDB estates are near MRT stations. Just last week, a tender for a plot in Simei Street 3 closed with an impressive 18 bids. Chip Eng Seng topped all rivals with an offer of $523 per sq ft (psf) per plot ratio.

This means, at that price, Singapore will likely see another suburban condo selling at or near the $1,000 psf mark, previously thought to be a resistance level.

Property experts said a key attraction of the Simei site - in the middle of an HDB estate - is its proximity to an MRT station and amenities. The land is just across the road from Simei MRT station and Eastpoint Mall.

'Actually, land next to MRT stations has always commanded higher prices than those that are not,' said Mr Nicholas Mak, a real estate lecturer at Ngee Ann Polytechnic. He said there were few attractive private sites for sale in the past 15 months. This is why many developers are competing hard in the Government's land sales tenders.

Said DTZ's head of South-east Asia research, Ms Chua Chor Hoon: 'Developers need to have a portfolio of sites to continually develop to maintain operations. So those with a smaller land bank would bid more aggressively to secure sites.' Also, developers are scrambling for suburban land because there is money to be made. Sales of mass market homes have remained strong since February last year, Mr Mak said.

Mass market launches, such as Caspian in Jurong, Double Bay Residences in Simei, Optima @ Tanah Merah and Trevista in Toa Payoh, met with strong demand last year. At Trevista, some units were sold for more than $1,000 psf.

'Rising prices of new mass market launches give confidence to developers to bid higher for government sites, especially attractive ones,' he added. Hence, the fact that the plot is located within an HDB estate is not a disadvantage when the market is hot.

This was not so in the 1980s to perhaps the early 1990s, when buyers did not see living in a condo in an HDB estate as moving up the social ladder.

'In the past, HDB estates were not as nice and HDB prices were low. People were not too happy to be too near them, if they could afford a private property,' said a property expert.

Ms Chua concurred: 'People weren't keen to buy a private condo next to an HDB estate unless it was priced low.' So, when a developer tries to test the market by launching a project that is not priced as low as expected, there would be 'disbelief and some resistance', she said. 'When the second one is launched, and there's good demand, then it becomes more accepted. That's how new trends start,' she added.

Times have changed. Old HDB estates have been spruced up or had some blocks torn down for rebuilding, while new HDB estates have more whistles and bells, experts said. HDB flats are in hot demand these days, with resale prices at record highs. HDB data showed that resale prices rose 2.8 per cent in the first quarter over the previous one, lifting it to yet another high.

Those living in upper-mid to high-end projects will still prefer more exclusive sites, experts said. But if they are buying and eyeing the rental market, a condo in an HDB estate brings attributes that tenants want. 'There are more expats employed on local terms, with less generous housing budgets. They usually have no cars and thus prefer to stay near MRT stations,' said Mr Mak.

joyceteo@sph.com.sg