New Reporter
05-09-23, 11:10
What if the latest Lentor housing site sells for well below nearby plots? That’s no bad thing
Leslie Yee
Sep 04, 2023
RESULTS of tenders for Government Land Sales (GLS) sites in Singapore are closely watched.
Will the upcoming tender by the Urban Redevelopment Authority (URA) for the sixth private housing site to be sold at Lentor Central in the Yio Chu Kang area draw a weak response? Developers may be cautious given high interest rates, slow take-up at some new launches, high construction costs, the large amount of new housing supply in the Lentor vicinity, and economic uncertainty.
This 99-year leasehold Lentor Central site has an area of 14,703.2 square metres (sq m) as well as a maximum gross floor area of 41,169 sq m, and can yield around 475 homes. The tender closes on Sep 12.
https://i.imgur.com/qwAcXHJ.png
A nearby housing plot put up by the state for tender at Lentor Gardens drew only one bidder when it closed in April. A joint venture between GuocoLand : F17 0% and Hong Leong Holdings’ Intrepid Investments secured the site for S$486.8 million, or nearly S$985 per square foot per plot ratio (psf ppr).
The price psf ppr fetched for the most recently tendered Lentor Gardens site is lower than that for the Lentor Central plot and the Lentor Hills Road (Parcel B) plot at the state tender that closed in September 2022 by around 11 per cent and 13 per cent respectively.
The number of bids received for the five GLS sites sold to date in the new Lentor Hills Estate has fallen steadily from the nine bids that were received for the first site in July 2021. Might the latest Lentor Central site draw no or only low-ball bids?
The state tender that closed in late June for a commercial and residential site at Tampines Avenue 11, which will be integrated with a bus interchange, community club, hawker centre and the future Tampines North MRT station, drew a top bid of S$1.21 billion or S$885 psf ppr from a joint venture between a UOL-Singapore Land consortium and CapitaLand Development.
A bid for the latest Lentor Central site of 12 per cent below the price psf ppr for the Lentor Gardens site and 2 per cent below the price psf ppr for the Tampines Avenue 11 site would translate to S$867 psf ppr. Will URA accept such a price?
Bidding process
Perhaps the bidding process for GLS sites can be refined to ensure better price discovery.
For the Lentor Central site, a tenderer has to submit a duly completed tender form in a sealed envelope together with the tender deposit at or before noon on Sep 12 at The URA Centre on Maxwell Road.
Interested developers may largely be relying on guesswork to gauge the level of interest in the site. Some interested parties may not bid because they wrongly read interest levels in the site.
Holding a physical auction could lead to more active participation by developers and better price discovery.
Under the existing tender process, a developer who wants to bid S$867 psf ppr for the Lentor Central site may decide not to waste time in submitting a bid because it expects other parties to submit bids at above this price.
In a physical auction where interested parties are asked to submit successive bids that exceed preceding ones, a developer could bid and possibly succeed in securing the site.
An alternative to holding a physical auction is to hold an online one. The outcome achieved by an online auction could be similar to the physical one, albeit with perhaps less drama.
Nonetheless, a process where bidders submit bids in closed envelopes without knowing what other parties are bidding can at times benefit state coffers.
Recently, Chinese developer Kingsford Huray Development and two others emerged as the top bidder for the Marina Gardens Lane site, with a S$1.03 billion bid that was 42 per cent higher than the next-highest bidder.
Perhaps Kingsford and its partners could have saved around S$300 million on land costs under a physical or online auction.
Awarding of sites
Still, there is little risk of a low-ball offer succeeding in snaring the latest Lentor Central site. While selection of the winning tender will be based on tendered sale price, URA can reject the highest or any tender.
It may make sense for URA to reject a sole bid of S$867 psf ppr for the Lentor Central site. The site can be relaunched for tender in another six to 12 months and fetch a higher price if sentiment improves. Developers could turn more bullish in land bids should interest rates soften in 2024.
Maximising land sales proceeds matters. Such proceeds are invested as part of reserves, and spending of the returns is done via the Net Investment Returns Contribution. This allows land sales to be spent in a sustainable way, thus providing a continual stream of income to the national Budget.
The GLS Programme is key in shaping Singapore’s physical development into an attractive city with a good quality of life.
State land is released for development via the GLS Programme. The confirmed list supply of private housing in the GLS programme rose by 26 per cent in H2 versus H1.
To support Singapore’s physical development, perhaps the inclination should be to generally accept bids for confirmed list GLS sites, even if at times top bids may be perceived to be low. Ultimately, having adequate supply is needed to meet housing needs and prevent runaway home prices.
Housing developers paying high land prices can contribute to rising new private home prices as they pass on higher costs to buyers. Some young people may get frustrated if they cannot fulfil their private housing aspirations due to high selling prices.
Potential homebuyers will cheer if a developer buys the latest Lentor Central site for a lower price psf ppr than other sites in Lentor Hills Estate and launches units for sale at a significant discount to recently launched projects nearby.
Sure, selling prices of new private homes are largely dictated by market appetite at the time of launch. Still, cheaper land prices will give developers greater leeway to price new homes more reasonably.
Suburban private home prices have risen strongly over recent years. Amid economic uncertainties, locals buying for owner occupation will welcome a slight dip in prices of new private suburban homes.
https://www.businesstimes.com.sg/opinion-features/what-if-latest-lentor-housing-site-sells-well-below-nearby-plots-thats-no-bad
Leslie Yee
Sep 04, 2023
RESULTS of tenders for Government Land Sales (GLS) sites in Singapore are closely watched.
Will the upcoming tender by the Urban Redevelopment Authority (URA) for the sixth private housing site to be sold at Lentor Central in the Yio Chu Kang area draw a weak response? Developers may be cautious given high interest rates, slow take-up at some new launches, high construction costs, the large amount of new housing supply in the Lentor vicinity, and economic uncertainty.
This 99-year leasehold Lentor Central site has an area of 14,703.2 square metres (sq m) as well as a maximum gross floor area of 41,169 sq m, and can yield around 475 homes. The tender closes on Sep 12.
https://i.imgur.com/qwAcXHJ.png
A nearby housing plot put up by the state for tender at Lentor Gardens drew only one bidder when it closed in April. A joint venture between GuocoLand : F17 0% and Hong Leong Holdings’ Intrepid Investments secured the site for S$486.8 million, or nearly S$985 per square foot per plot ratio (psf ppr).
The price psf ppr fetched for the most recently tendered Lentor Gardens site is lower than that for the Lentor Central plot and the Lentor Hills Road (Parcel B) plot at the state tender that closed in September 2022 by around 11 per cent and 13 per cent respectively.
The number of bids received for the five GLS sites sold to date in the new Lentor Hills Estate has fallen steadily from the nine bids that were received for the first site in July 2021. Might the latest Lentor Central site draw no or only low-ball bids?
The state tender that closed in late June for a commercial and residential site at Tampines Avenue 11, which will be integrated with a bus interchange, community club, hawker centre and the future Tampines North MRT station, drew a top bid of S$1.21 billion or S$885 psf ppr from a joint venture between a UOL-Singapore Land consortium and CapitaLand Development.
A bid for the latest Lentor Central site of 12 per cent below the price psf ppr for the Lentor Gardens site and 2 per cent below the price psf ppr for the Tampines Avenue 11 site would translate to S$867 psf ppr. Will URA accept such a price?
Bidding process
Perhaps the bidding process for GLS sites can be refined to ensure better price discovery.
For the Lentor Central site, a tenderer has to submit a duly completed tender form in a sealed envelope together with the tender deposit at or before noon on Sep 12 at The URA Centre on Maxwell Road.
Interested developers may largely be relying on guesswork to gauge the level of interest in the site. Some interested parties may not bid because they wrongly read interest levels in the site.
Holding a physical auction could lead to more active participation by developers and better price discovery.
Under the existing tender process, a developer who wants to bid S$867 psf ppr for the Lentor Central site may decide not to waste time in submitting a bid because it expects other parties to submit bids at above this price.
In a physical auction where interested parties are asked to submit successive bids that exceed preceding ones, a developer could bid and possibly succeed in securing the site.
An alternative to holding a physical auction is to hold an online one. The outcome achieved by an online auction could be similar to the physical one, albeit with perhaps less drama.
Nonetheless, a process where bidders submit bids in closed envelopes without knowing what other parties are bidding can at times benefit state coffers.
Recently, Chinese developer Kingsford Huray Development and two others emerged as the top bidder for the Marina Gardens Lane site, with a S$1.03 billion bid that was 42 per cent higher than the next-highest bidder.
Perhaps Kingsford and its partners could have saved around S$300 million on land costs under a physical or online auction.
Awarding of sites
Still, there is little risk of a low-ball offer succeeding in snaring the latest Lentor Central site. While selection of the winning tender will be based on tendered sale price, URA can reject the highest or any tender.
It may make sense for URA to reject a sole bid of S$867 psf ppr for the Lentor Central site. The site can be relaunched for tender in another six to 12 months and fetch a higher price if sentiment improves. Developers could turn more bullish in land bids should interest rates soften in 2024.
Maximising land sales proceeds matters. Such proceeds are invested as part of reserves, and spending of the returns is done via the Net Investment Returns Contribution. This allows land sales to be spent in a sustainable way, thus providing a continual stream of income to the national Budget.
The GLS Programme is key in shaping Singapore’s physical development into an attractive city with a good quality of life.
State land is released for development via the GLS Programme. The confirmed list supply of private housing in the GLS programme rose by 26 per cent in H2 versus H1.
To support Singapore’s physical development, perhaps the inclination should be to generally accept bids for confirmed list GLS sites, even if at times top bids may be perceived to be low. Ultimately, having adequate supply is needed to meet housing needs and prevent runaway home prices.
Housing developers paying high land prices can contribute to rising new private home prices as they pass on higher costs to buyers. Some young people may get frustrated if they cannot fulfil their private housing aspirations due to high selling prices.
Potential homebuyers will cheer if a developer buys the latest Lentor Central site for a lower price psf ppr than other sites in Lentor Hills Estate and launches units for sale at a significant discount to recently launched projects nearby.
Sure, selling prices of new private homes are largely dictated by market appetite at the time of launch. Still, cheaper land prices will give developers greater leeway to price new homes more reasonably.
Suburban private home prices have risen strongly over recent years. Amid economic uncertainties, locals buying for owner occupation will welcome a slight dip in prices of new private suburban homes.
https://www.businesstimes.com.sg/opinion-features/what-if-latest-lentor-housing-site-sells-well-below-nearby-plots-thats-no-bad