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15-08-14, 17:19
http://www.businesstimes.com.sg/archive/friday/premium/top-stories/fernvale-tenders-reflect-drop-market-confidence-20140808
Published August 08, 2014
Fernvale tenders reflect drop in market confidence
Chip Eng Seng-led consortium tops bids for adjacent private housing sites
By Kalpana Rashiwala
[email protected] @KalpanaBT
[SINGAPORE] The latest state land tender for a pair of adjacent private housing sites in Fernvale Road in Sengkang showed a thinning in tender participation rates as well as land prices - compared with two sites in the area sold last year before the total debt servicing ratio kicked in.
This reflects less confidence among developers given current weaker market conditions, said industry players.
At yesterday's tender for the 99-year plots, Parcel A along Fernvale Road drew just four bids, and the next-door Parcel B, three bids - down sharply from the eight and nine bids respectively for the two sites tendered in April and June last year respectively.
While the earlier sites, which are now being developed into Riverbank@Fernvale and Rivertrees Residences condos, are slightly superior as they boast water-frontage, the latest pair of sites along Fernvale Road are closer to the Jalan Kayu amenities such as food and beverage outlets, notes JLL national director Ong Teck Hui.
The top bids for Parcels A and B in Fernvale Road - S$438.17 per square foot per plot ratio (psf ppr) and S$448.35 psf ppr respectively - are also significantly lower than last year's winning bids of S$489 psf ppr and S$533 psf ppr for the Riverbank@Fernvale and Rivertrees Residences sites respectively. Against the land price of Rivertrees Residences - the highest bids for Parcels A and B on Fernvale Road are lower by 17.8 per cent and 15.9 per cent respectively.
A tie-up involving Chip Eng Seng, Kim Seng Heng Realty and Heeton Homes placed the highest bids for both parcels in the latest tender. Analysts attribute the slightly higher bid for Parcel B to it being closer to Thanggam LRT Station. "These bid levels are around my expectation of $450 psf ppr for the two plots taking into account weaker market conditions today," said Mr Ong. The introduction of the TDSR (total debt servicing ratio) framework in late-June 2013 has reduced property transactions.
Analysts polled by BT when the sites were launched by the Urban Redevelopment Authority (URA) in June this year had forecast top bids of $420-480 psf ppr for the two sites, with around five bids for each plot.
"Developers are becoming more cautious in their land bids - due to slower housing sales post-TDSR," said SLP International executive director Nicholas Mak. "Land prices are likely to continue softening for the next six to nine months, amid weak demand and falling prices of private homes," he added.
Putting things into perspective, JLL's Mr Ong noted that yesterday's top bids are the lowest for private residential sites at state tenders since the Vue 8 Residence site in Pasir Ris was sold back in June 2012 for S$418 psf ppr. Besides generally weaker market conditions, the bidders for the latest two sites would have factored unsold inventory in Riverbank@Fernvale and Rivertrees Residences. "Both were launched in February 2014 and of the combined total stock of 1,050 units, some 52 per cent remained unsold as at end-June 2014."
Despite reasonably good take-up at initial launch, sales progress in subsequent months has been slow. "It shows that the projects' average pricing at S$1,030 to S$1,110 psf is unable to attract sufficient buyers to achieve better sales progress. Consequently bidders at today's tenders would have to bid considerably lower for the sites in order to price the projects more competitively and achieve better sales take-up," added Mr Ong.
When contacted last night, Raymond Chia, group CEO of Chip Eng Seng, which is leading the consortium that placed top bids for both Fernvale Road plots, said: "Clinching both sites is more of a strategic move to better manage construction costs and overall planning for the development. We're exploring whether to do separate projects for the two sites or a single development, but we should have nearly 1,400 units in all, encompassing a range of unit sizes."
Chip Eng Seng is taking the majority 60 per cent stake in the consortium, while a joint venture between Kim Seng Heng Realty and Heeton Homes will hold the balance. "With both Chip Eng Seng and Kim Seng Heng involved in the construction business, we should be able to contain our costs better," said Mr Chia.
The breakeven costs for the two sites are estimated at around $850-890 psf. And the consortium is hoping to launch the initial phase in first-half next year at around $1,000 psf on average.
Also bidding for Parcel A yesterday were a City Developments-TID partnership (bidding around S$400 psf ppr), Sim Lian Land (S$361 psf ppr) and Koh Brothers (S$321 psf ppr). Vieing for Parcel B were Flair Development, controlled by Wee Ee Chao (S$418 psf ppr) and Sim Lian Land (S$392 psf ppr).
Published August 08, 2014
Fernvale tenders reflect drop in market confidence
Chip Eng Seng-led consortium tops bids for adjacent private housing sites
By Kalpana Rashiwala
[email protected] @KalpanaBT
[SINGAPORE] The latest state land tender for a pair of adjacent private housing sites in Fernvale Road in Sengkang showed a thinning in tender participation rates as well as land prices - compared with two sites in the area sold last year before the total debt servicing ratio kicked in.
This reflects less confidence among developers given current weaker market conditions, said industry players.
At yesterday's tender for the 99-year plots, Parcel A along Fernvale Road drew just four bids, and the next-door Parcel B, three bids - down sharply from the eight and nine bids respectively for the two sites tendered in April and June last year respectively.
While the earlier sites, which are now being developed into Riverbank@Fernvale and Rivertrees Residences condos, are slightly superior as they boast water-frontage, the latest pair of sites along Fernvale Road are closer to the Jalan Kayu amenities such as food and beverage outlets, notes JLL national director Ong Teck Hui.
The top bids for Parcels A and B in Fernvale Road - S$438.17 per square foot per plot ratio (psf ppr) and S$448.35 psf ppr respectively - are also significantly lower than last year's winning bids of S$489 psf ppr and S$533 psf ppr for the Riverbank@Fernvale and Rivertrees Residences sites respectively. Against the land price of Rivertrees Residences - the highest bids for Parcels A and B on Fernvale Road are lower by 17.8 per cent and 15.9 per cent respectively.
A tie-up involving Chip Eng Seng, Kim Seng Heng Realty and Heeton Homes placed the highest bids for both parcels in the latest tender. Analysts attribute the slightly higher bid for Parcel B to it being closer to Thanggam LRT Station. "These bid levels are around my expectation of $450 psf ppr for the two plots taking into account weaker market conditions today," said Mr Ong. The introduction of the TDSR (total debt servicing ratio) framework in late-June 2013 has reduced property transactions.
Analysts polled by BT when the sites were launched by the Urban Redevelopment Authority (URA) in June this year had forecast top bids of $420-480 psf ppr for the two sites, with around five bids for each plot.
"Developers are becoming more cautious in their land bids - due to slower housing sales post-TDSR," said SLP International executive director Nicholas Mak. "Land prices are likely to continue softening for the next six to nine months, amid weak demand and falling prices of private homes," he added.
Putting things into perspective, JLL's Mr Ong noted that yesterday's top bids are the lowest for private residential sites at state tenders since the Vue 8 Residence site in Pasir Ris was sold back in June 2012 for S$418 psf ppr. Besides generally weaker market conditions, the bidders for the latest two sites would have factored unsold inventory in Riverbank@Fernvale and Rivertrees Residences. "Both were launched in February 2014 and of the combined total stock of 1,050 units, some 52 per cent remained unsold as at end-June 2014."
Despite reasonably good take-up at initial launch, sales progress in subsequent months has been slow. "It shows that the projects' average pricing at S$1,030 to S$1,110 psf is unable to attract sufficient buyers to achieve better sales progress. Consequently bidders at today's tenders would have to bid considerably lower for the sites in order to price the projects more competitively and achieve better sales take-up," added Mr Ong.
When contacted last night, Raymond Chia, group CEO of Chip Eng Seng, which is leading the consortium that placed top bids for both Fernvale Road plots, said: "Clinching both sites is more of a strategic move to better manage construction costs and overall planning for the development. We're exploring whether to do separate projects for the two sites or a single development, but we should have nearly 1,400 units in all, encompassing a range of unit sizes."
Chip Eng Seng is taking the majority 60 per cent stake in the consortium, while a joint venture between Kim Seng Heng Realty and Heeton Homes will hold the balance. "With both Chip Eng Seng and Kim Seng Heng involved in the construction business, we should be able to contain our costs better," said Mr Chia.
The breakeven costs for the two sites are estimated at around $850-890 psf. And the consortium is hoping to launch the initial phase in first-half next year at around $1,000 psf on average.
Also bidding for Parcel A yesterday were a City Developments-TID partnership (bidding around S$400 psf ppr), Sim Lian Land (S$361 psf ppr) and Koh Brothers (S$321 psf ppr). Vieing for Parcel B were Flair Development, controlled by Wee Ee Chao (S$418 psf ppr) and Sim Lian Land (S$392 psf ppr).