ST : Punggol site bids below expectations

Sep 24, 2010

Punggol site bids below expectations

Lower bids suggest cooling measures starting to have impact, say observers

By Jessica Cheam

A PUNGGOL executive condominium site tender closed yesterday with four developers putting in bids below industry expectations.

The highest bid for the Punggol Drive plot was $136.2 million, coming from Qingdao Construction (Singapore) and working out to be $237 per sq ft (psf) - below the anticipated $250 to $290 psf predicted by analysts.

The bid was only 2.2 per cent higher than the second-highest offer of $133.2 million from Hoi Hup Realty, Sunway Developments and SC Wong Holdings.

SLP International research and consultancy executive director Nicholas Mak noted that Qingdao's bidding price was 23 per cent lower than the amount paid by ChoiceHomes Investments and CEL Development for another exec condo site in Punggol Field earlier in June.

Industry observers say the tender results suggest that the Government's supply-side measures to cool Singapore's red-hot property market are beginning to have an impact on land prices.

For the second half of the year, the state has earmarked the largest potential amount of land for release since the start of the land sales programme in 2001.

This, together with government measures introduced last month to dampen demand by tightening financing and home ownership rules, appear to be lowering land prices, said Mr Mak.

'This could lead to more price competition among developers next year,' he added.

'Whether this would (eventually) lead to lower home prices will depend on whether the investment and economic climate at that time will be worse than that experienced today.'

ChoiceHomes Investments and CEL Development put in the third-highest bid for the site tender that closed yesterday - $119.9 million - with Frasers Centrepoint coming in last at $103.4 million.

CBRE Research executive director Li Hiaw Ho said that the plot had received a 'fair response' and that the modest number of bids reflected the location, which is some distance from Punggol Central.

He predicted that the units in the new exec condo project 'will possibly sell at around $600 psf'.

Similar homes sold in the resale market, such as those at Park Green, The Rivervale and The Florida, were commanding prices of $550 to $650 psf between June and last month, he noted.

Mr Li felt that the project will likely appeal to young couples and those with young families, given the Government's plans to develop Punggol New Town into a residential estate with mostly waterfront housing.

In a separate statement issued yesterday, CBRE executive director of residential services Joseph Tan said rising home prices were likely to be capped by the recent cooling measures.

'We expect the residential market to mellow in the fourth quarter of this year,' he said.

Mr Tan also noted that about 3,300 to 3,500 new homes were sold in the third quarter. Despite being a strong volume, this was considerably lower than the 4,033 and 4,380 units sold in the second and first quarters respectively.

'Projects with strong location attributes and projects with small-format units continued to be the star performers,' he said.

Projects expected to be launched in the near future include Vacanza @ East in Lengkong Tujoh, and executive condominiums Esparina Residences in Compassvale Bow and The Canopy in Yishun.

Mr Tan anticipates the volume of new homes sales in the fourth quarter to be lower than in previous quarters, at around 2,000 units.

'Developers will continue to look for development sites but will likely be less bullish in their bids,' he added.

jcheam@sph.com.sg


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Four bids

· Qingdao Construction (Singapore):
$136.17 million ($2,550.96 per sq m/gross floor area)

· Hoi Hup Realty, Sunway Developments and SC Wong Holdings
$133.21 million ($2,495.50psm/gfa)

· ChoiceHomes Investments/CEL Development
$119.88 million ($2,245.78psm/gfa)

· Frasers Centrepoint
$103.43 million ($1,937.59psm/gfa)

SOURCE: HDB