Tender prices for Jiak Kim and Fourth Avenue sites set benchmark despite MAS warning

By
/ EdgeProp
|
December 5, 2017 11:28 PM SGT
The close of the Jiak Kim Street and Fourth Avenue Government Land Sales (GLS) tenders on Dec 5 saw 10 and seven bids respectively, and land prices reaching a new high in both locations. This is despite the Monetary Authority of Singapore’s (MAS) warning on a possible oversupply.
In its Financial Stability Review released on Nov 30, MAS said the redevelopment of the recent en bloc sites and the supply from GLS sites could add another 20,000 new private housing units. “This will more than double the number of unsold units currently in the pipeline within the next one to two years,” it notes.
There were more than 30,000 vacant private housing units in 3Q2017, says MAS. Despite a decline in the vacancy rate from the peak of 8.9% in 2Q2016, it remains elevated at 8.4% in 3Q2017 compared with 5.2% in 1Q2013 and the historical average of 6.5% over the past decade. “With slower population growth and relatively high vacancy rates, there is considerable uncertainty as to whether the new supply coming on stream can be fully absorbed by the market,” says MAS.
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Excluding commercial and white sites, the top bid of $955.4 million, or $1,733 psf per plot ratio (ppr), submitted by Frasers Centrepoint for the Jiak Kim Street site, is the highest land price on a psf basis for GLS sites sold, says Christine Li, director of research at Cushman & Wakefield. The second-highest bid for the site that was previously occupied by Zouk, submitted by Hong Leong, is only 0.57% lower, “one of the lowest spreads in recent history”, according to Li.
The top bid is 39.9% higher than that paid for the Martin Place GLS site in June 2016, which GuocoLand is developing into Martin Modern. Li says the bid for the Jiak Kim Street site translates into $1,580 psf ppr, including an additional 10% bonus gross floor area (GFA). This means Frasers Centrepoint is pricing a slight increase of 6% to 7% into the sale price of the future development, based on the median sale price of $2,343 psf at Martin Modern in October. “This is in line with the market expectation that prices of new homes will rise 5% to 10% next year,” says Li.
Tricia Song, head of research for Singapore at Colliers International, expects a break-even cost of $2,400 to $2,450 psf for the project, and an average price of $2,600 to $2,700 psf, which will be 10% higher than Martin Modern’s median price in October. “The bullish bids for the Jiak Kim Street site came on the back of its attractive attributes, the limited supply of sites in the area and brisk home sales in the vicinity,” says Song, who notes that 186 of the 210 units launched at Martin Modern have been sold since it was launched in July.
“We believe the strong bids will heavily influence the demand and pricing of collective sale sites in the city, including the iconic Pearlbank Apartments in Outram,” adds Song.
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The 1.35ha Jiak Kim Street site is located along the Singapore River and flanked by the Grand Copthorne Waterfront Hotel Singapore, Tribeca and Mirage Tower. It is zoned “Residential with 1st storey Commercial” and has a maximum GFA of 551,478 sq ft, including a 16,146 sq ft commercial component. According to URA, it can yield 525 units. Along with the Fourth Avenue site, the 99-year leasehold site was previously on the Reserve List of the GLS programme. They were launched for tender on Nov 2 and Oct 19 respectively.
The tender results reflect developers’ preference for the Jiak Kim Street site as it drew a higher number of participants and a top bid that was 39% higher than its reserve price, says Tay Huey Ying, head of research and consultancy at JLL Singapore. In comparison, the top bid for the Fourth Avenue site was 23% higher than its reserve price.
However, the top bid of $552.96 million ($1,540 psf ppr) for the Fourth Avenue site is still bullish, according to Cushman & Wakefield’s Li, as the new development will have to be sold at around $2,250 psf. Allgreen Properties won the tender for the site, following its acquisition of the freehold Crystal Tower at $1,840 psf ppr and Royalville at $1,960 psf ppr through collective sales last week. The 1.85ha residential site is adjacent to the Sixth Avenue MRT station and about 300m away from Royalville. It has a maximum GFA of 359,063 sq ft and can accommodate around 455 units, according to URA.
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“Although most projects in the locality are of freehold status, the location of the Fourth Avenue site is good enough to offset the leasehold status,” says Li. It is also close to several reputable schools, such as Nanyang Primary School, Raffles Girls’ Primary School and Hwa Chong Junior College, she adds.
Bids for Jiak Kim Street site
Ranking
Name of developer
Tender price ($)
Price psf ppr ($)
1
Frasers Centrepoint
955,407,818
1,733
2
Hong Leong Holdings and Hong Realty
950,000,000
1,723
3
UOL Group and United Industrial Corporation
940,215,000
1,705
4
China Overseas Holdings and China Construction
926,999,000
1,681
5
Allgreen Properties Limited
926,428,206
1,680
6
City Developments Limited and Logan Property
888,888,888
1,612
7
OUE, Far East Consortium Properties and New World Development
885,000,000
1,605
8
Far East Organization
855,777,000
1,552
9
GuocoLand
835,439,720
1,515
10
Wheelock Properties
731,000,000
1,326
Source: URA, JLL, EdgeProp
Bids for Fourth Avenue site
Ranking
Name of developer
Tender price ($)
Price psf ppr ($)
1
Allgreen Properties Limited
552,956,000
1,540
2
Bukit Sembawang Estates Limited
542,203,000
1,510
3
City Developments Limited, Hong Leong Holdings Limited and Hong Realty
531,417,680
1,480
4
Far East Consortium Properties
520,645,700
1,450
5
Wing Tai Holdings
508,999,000
1,418
6
Cheung Kong Property Holdings
485,144,800
1,351
7
Hoi Hup Realty and Sunway Developments
485,000,000
1,351
Source: URA, JLL, EdgeProp