Sim Lian tops bids for Choa Chu Kang Drive EC site, beating market expectations
The latest state tender for an executive condominium (EC) site in Choa Chu Kang Drive shows that developers would still make a beeline for attractive sites.
Located about 550 metres from Choa Chu Kang MRT Station and Bus Interchange and Lot One Shoppers’ Mall, the 1.9-hectare plot drew eight bids, with the highest at S$361.08 psf ppr from Sim Lian Land – slightly above market expectations.
Some market watcher had expected the site to draw 5-6 bids with the winning bid at S$320-350 psf ppr. However, he added: “I see a mix of both caution and optimism. The optimism is in the top bid being higher than expected; the caution is the top bid being pretty close to the S$357 psf ppr average price for the two adjacent Choa Chu Kang Grove EC plots sold in February – despite the latest site being more attractive.”
The pair of Choa Chu Kang Grove sites are about 1.1 km from Choa Chu Kang MRT Station.
At the latest tender in Choa Chu Kang Drive, Sim Lian’s bid was just 2.2 per cent above the next highest, $353.21 psf ppr, from a consortium comprising Hoi Hup Realty, Sunway Developments and Oriental Worldwide Investments.
The number of bids and close winning margin indicate the healthy interest in the EC market, despite current market conditions.
City Developments Limited (CDL) unit Verwood Holdings teamed up with TID Residential to bid nearly S$343 psf ppr, the third highest. Back in March 2011, CDL had paid S$321 psf ppr for the next-door plot, on which it is developing The Rainforest EC project.
Also bidding at Thursday’s tender were Nanshan Group Singapore (S$337 psf ppr) and Qingjian Realty (S$331.08 psf ppr). A partnership of Evia Real Estate (6), Ho Lee Group, CNH Investment, OKP Land and Lian Soon Holdings offered S$311.46 psf ppr while MCL Land priced the site at S$305.17 psf ppr . This was significantly lower than the S$357 psf ppr average price that it had paid earlier this year for the pair of Choa Chu Kang Grove plots, in a much inferior location. MCL plans to amalgate the plots and build a project of over 1,300 units.
The lowest bid at Thursday’s tender – from Koh Brothers unit KBD Ventures – was S$280.21 psf ppr.
The strong turnout of eight bidders along with the higher-than-expected top bid of S$361 psf ppr constrasts with the lacklustre performance seen two months ago for an EC site in Sembawang Avenue, about 550 metres from Sembawang MRT Station.
That site drew just four bids and its winning bid of S$320 psf ppr was the lowest price for an EC site since November 2012.
ECs are a public-private housing hybrid with initial buyer eligibility and resale conditions that are fully lifted 10 years after the completion of the project.
Demand for ECs has softened following the December 2013 introduction of a mortgage service ratio (MSR) cap for EC purchases from developers.
Nevertheless, pent-up demand for this housing type is expected for the five EC project launches slated by year-end.
This is because no new EC projects have been launched in nearly a year, following regulations announced in January 2013 stipulating that developers would be allowed to sell units in EC projects only 15 months from the date of award of the site, or after completion of foundation works, whichever is earlier. Given that mass-market condo prices have started to soften, most analysts would expect prices of EC units to follow suit.
Market watchers reckon that based on the top bid for the Choa Chu Kang Drive site, the breakeven cost could be around S$700-720 psf. This still leaves the bidder with some cushion for a potential price softening from current levels. In the first half of this year, developers’ sales of EC units averaged around S$790 psf going by caveats data.
When contacted, a Sim Lian spokesman said that the group expects to launch a project on the site in early 2016, given current rules. “We’re looking at a project of 500-plus units. This is an attractive location, near the MRT station, a fairly big suburban mall and other amenities.”
Developers who pay high prices for EC sites may raise the proportion of smaller-sized units – for instance, by building more two-bedders instead of three-bedroom units, in order to keep the price quantum within reach of buyers’ MSR cap.
Source: Business Times – 5 September 2014