TODAY Online : A busy year on the horizon?

A busy year on the horizon?

05:55 AM Nov 28, 2009

by Donald Han

EVEN though Singapore saw its worst economic recession since independence this year, the property market remained relatively buoyant, with the resurgence led by sell-out mass market condominium projects such as The Caspian and The Alexis.

In the first 10 months of this year, developers sold 13,905 new homes - almost three times that in the whole of last year. In fact, Q3 alone saw developers selling 5,720 units - more than in the whole of 2008. Total sales volume this year is likely to breach the 15,000 unit mark, exceeding 2007's record high of 14,811 new home sales.

This remarkable development was mainly supported by the convergence of huge pent up demand, low savings deposit rate, stock market revival and a market flushed with liquidity.

Twelve months ago, no one would have dared to predict a U-shaped property market recovery, let alone a V-shaped rebound this year. Even the most optimistic property consultant would not have anticipated Q3's property price index to have turned a corner, registering a mind-boggling 15.8-per-cent price rise quarter-on-quarter. With just about a month to go, we are likely to end the year with a price hike of between 2 and 5 per cent.

With economic improvement and the ease of credit, developers have been busy replenishing their land bank. Five Government sites, which have been on the Urban Redevelopment Authority's Reserve List since last year, have been released from as early as July. The parcels represent the choicest residential sites on the list, mostly within established residential enclaves with reasonably close proximity to MRT stations, thus making end products easily saleable.

The five sites attracted between six and 15 bidders per tender exercise. Each of the successful bids exceeded initial reserve prices by between 2.32 and 3.07 times - a huge premium. Fierce bidding among developers translated to high bids for land prices. With developers typically passing on this land cost to buyers, one can only expect higher project launch prices when these offerings come to the market.

But the Government's release of a slew of 99-year leasehold sites the 1H2010 Government Land Sales (GLS) programme sees a variety of sites, some of which may not translate to high selling prices.

There are two plum sites which developers have seemingly given a miss thus far. These are within excellent strategic development zones which provide a catalytic start to urban rejuvenation and being part of Government's larger decentralisation and suburbanisation programme.

The sales of sites at Kallang Riverside (for the development of hotel with possibility residential component) and Jurong East Street 13 (a "white site" zoning where part residential is permissible) at Jurong Gateway near to Jurong Lake district are paramount examples. These sites have been placed in the reserve list since last year, but they have not received the necessary attention despite their immense potential and location appeal.

Developers should look at sites like these at Kallang and Jurong when studying their choices in the GLS programme. After all, those that have embarked in new and seemingly obscure development precincts have in the past been rewarded with "first mover" advantage.

These include Ho Bee Group's achievement at Sentosa Cove and the consortium of Keppel Land, Cheung Kong Holdings and Hongkong Land's success at Marina Bay. Next year looks set to be a busy year for property developers. ¢

The writer is the managing director of Cushman and Wakefield Singapore. The opinions expressed here are his own.