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

/ 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.
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...