An overwhelming 24 bids were submitted for the tender of a residential plot in Toh Tuck Road, the Urban Redevelopment Authority (URA) announced on Tuesday. This was the second highest number of bids submitted in a residential government land sales (GLS) tender since 2009, when the tender for a parcel in Westwood Avenue attracted 32 bids.
More recently, in November 2012, a tender for an Upper Bukit Timah plot also came close, garnering 23 bids; it was won by World Class Developments, a unit of Aspial Corporation, which developed it into the 60-year leasehold “retirement resort”, The Hillford.
The results completely exceeded property consultants’ earlier expectations of up to 16 bidders, with the highest bid at no more than S$750 psf ppr.
When contacted, Neo Keng Hoe, general manager at SP Setia, said the group plans to build a five-storey 320-unit development on the plot, but he could not comment on launch prices at the moment.
In second place was Singhaiyi Investments with a bid of S$260.2 million (or S$922 psf ppr); and in third place, Centrex Developments with a bid of S$250.9 million (or S$889 psf ppr). JLL national director for research and consultancy Ong Teck Hui called it a “bewildering tender”. “Hunger for sites among developers and an expectation of a turnaround in the market are possibly the key factors that intensified the bidding, besides the attractiveness of the site and the affordable capital outlay.
The recent easing of cooling measures and the positive reading of the Q1 2017 flash estimates are possible underlying contributory factors,” he said. The 18,721.4 square metre (sq m) site can yield a maximum gross floor area of 26,210 sq m, or about 325 units, which consultants had considered to be a manageable size for property developers.
Mr Ong noted that the bidding was particularly aggressive among the top five bidders which was within a 10.4 per cent price range, and all of them were above S$850 psf ppr, suggesting that they shared a similar bullish market outlook. He added that the top bid translates to a break-even price of about S$1,450 psf, and launch price of about S$1,600 psf.
Desmond Sim, head of CBRE Research, Singapore & South East Asia, said the exceptionally high number of bids reflects developers’ keenness to shore up their land banks in the face of a dwindling number of residential plots for sale. “The first seven bids came in at above S$800 psf ppr, with a 1.8 per cent margin between the top two bids. This is a very clear indication that the window of opportunity through government land sales has tightened. “The plot’s attractive quantum of S$265 million gave developers the extra nudge, along with increasing confidence in the market’s possible recovery in the medium term.
The bid value may be relatively high but the manageable project size of around 325 units makes it a less risky proposition,” he said. Cushman & Wakefield Singapore research head Christine Li added: “It seems that after the government tweaked the cooling measures on March 10, there is a clear consensus among the developers that the demand will be strong enough to continue absorbing any increase in new supply.” Their optimism could also have been bolstered by the stellar sales performance in the mid-tier and mass market segment, judging by the new launch results since the beginning of the year, she said.
She is expecting more reserve sites to be triggered in the coming months, and more private en bloc deals to go through. The subject site is located along Upper Bukit Timah, nestled within an established residential estate of both public and low-rise private housing surrounded by amenities including local and international schools, tertiary institutions, shopping centres and transport nodes.
SLP International executive director Nicholas Mak, however, noted that the developers who made bids were not uniformly bullish. “About one third of the 24 bids were rather conservative. I believe that these developers are aware that this tender could be highly contested, and yet they still submitted conservative bids. This shows that they are not prepared to throw caution to the wind just for the sake of clinching a land parcel,” he said.