Tuesday, 28 September 2010

The Property Bubble & Investment Trap Part IX - Land Bid for Punggol 99 Yr LH EC Condo Site

A PUNGGOL executive condominium site tender closed last Thursday with four developers putting in bids below industry expectations, the latest for an EC site since the control measures were announced. The 99 LH site sits on 15,500 sq m and has a maximum allowable GFA of 570,000 sf. The site is situated at Punggol Drive / Punggol East, on the eastern boundary of Punggol New Town, is a short walk from Kandaloor LRT station.
It is a good sign that cooling measures are starting to have impact on the land bidding process for both mass market private condo and now EC sites, despite an inherent fault in the bidding process which I had pointed out in my earlier blog posting. The bidding price was 23% lower than that paid by ChoiceHomes Investments and CEL Development for another EC site in Punggol Field earlier in June.

The highest bid for the Punggol Drive plot was $136.2 million, from a China Contractor, Qingdao Construction (Singapore), and worked out to be $237 psf ppr - below the anticipated $250 to $290 psf ppr predicted by analysts.

The bid was only 2.2 per cent higher than the second-highest offer of $133.2 million from Hoi Hup Realty, Sunway Developments and SC Wong Holdings or about $231.8 psf ppr.

An analyst predicted units for this project to sell at about $600 psf which I would consider to be near fair but its location may not be very good. A price of $550 ~ $570 would be more equitable. In the resale market, units in Park Green, The Rivervale and The Florida were sold at $550-$650 psf between June and August 2010.

You may recall in my last posting, I said there is little difference between DBSS and mass condo sites and the lowest bid of the Hougang Ave 7 condo site @ $225 psf ppr seemed more logical for a DBSS site. Hence, you can see this consolidation in land price dropping to a low banding of $231.8 ~ $237 psf ppr for EC, closing in on DBSS land pricing as I predicted. The low pricing of the bids was expected for a location lacking in amenities and far from the Central Core.

The likely implication of this low pricing of the bids for EC Condo site will force future bids for DBSS sites to consolidate much lower to about $200~210 psf ppr. As I mentioned in my last post, I would expect future land bids for private mass condo (99 LH) sites to close between the band $280~$310 psf ppr.

Ultimately, the whole consolidation of the market and re-banding of sale prices may be shaken and work out to something as below, or even lower, with a premium of $30~$50 psf payable as premium payable for locational or other positive factors :-

Price Banding
(a) DBSS $450~$480 psf
(b) EC $550~$600 psf
(c) Mass Market Private 99 Yr LH Cond $680~$720 psf
(d) Mid Range Private 999 / FH Condo  $850~$1,000 psf
(e) Mid Upper Range Private 999 Yr / FH Condo $1,000 - $1,200 psf
(f) Low Range Luxury Condo 99 Yr LH / 999 Yr  / FH $1,200 ~ 2,000 psf
(g)Top Range Luxury Condo Private 999  / FH Above $2,000 psf

In the re-sale market, sales volume is expected to be lower as sellers continue to maintain their asking prices while potential buyers hold out for lower prices. The pace of increase has generally continued to slow this quarter. Future asking price for condo on these plots with cheaper land bids will certainly not be as high as the $830 psf that NV Residences at Pasir Ris is asking.

An analyst's report said resale prices of suburban leasehold homes increased by 2 per cent to $660 psf in this third quarter. This compares with a 4 per cent rise in the second quarter, which took prices to $648 psf. The 2007 peak for these homes was $615 psf. Re-sale prices tend to be lower than new launch prices with a premium of $30~$50 psf payable for age, location and other positive factors. If new condo launches continue to ask for ridiculous prices, it would make better sense to look for resale LH condos with hidden future values.

Reference # 1 :-
TODAY Sep 24, 2010

The tender for an executive condominium site at Punggol Drive and Punggol East has attracted four bids, with the highest from Qingdao Construction at $136 million.

The 99-year leasehold site sits on more than 15,500 sq m and has a maximum allowable gross floor area of more than 570,000 sq feet. The top bid translates to about $237 per square foot per plot ratio. The next highest bid is at $133 million, coming from joint bidders Hoi Hup Realty, Sunway Developments and SC Wong Holdings.

Mr Li Hiaw Ho, executive director of CBRE Research, said the low pricing of the bids was expected for a location lacking in amenities and further away from Punggol Central. Units in this new project will possibly sell around $600 per sq ft, he added.

The HDB will award the tender within the next two weeks.

Reference # 2

Reference # 3

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