http://www.businesstimes.com.sg/arch...roperty-sector

Published April 13, 2012

Property Sector

CIMB Research, April 12


NINE bids and a 16 per cent differential between the top two bids during the recent Pasir Ris tender reflect unabated demand for land sites.Active participation by smaller/ foreign players continues to bolster land bids. We remain watchful of headline volumes and subsequent land tenders.

The strong participation was expected, although the top bid came in at the higher end. We see larger players bidding with more caution.

The Government Land Tender for a parcel located next to Elias Mall and Pasir Ris Park drew a healthy nine bids. Elitist Development Pte Ltd (also lowest bidder for latest industrial site at Sims Drive), a small local private company, emerged as the top bidder with a tender price of S$472 per square foot (psf) on gross floor area (GFA) and S$661 psf on the site area. OUE and SingLand followed a distance behind at 16 per cent and 19 per cent below, respectively. The Elias site can be developed into strata landed or condominium units.

The Elias site tender reflects unabated demand for government land sites. Participation was similar to tenders held since October 2011, which had broadly received ten bids on average (versus eight from January to September).

Strong take-up in recent project launches in the East underpins the bids. While strong demand was expected for the site, the top bidder likely priced in a premium, bidding 17 per cent higher than that of the previous Pasir Ris site tender in H1 2011 (released recently as Ripple Bay at average average selling price of S$850 psf). The second-highest bid is largely in line with Ripple Bay's land cost. Neighbouring projects (Oasis@Elias, Ris Grandeur) went for median prices of S$840-890 psf in the secondary market in Q1 2012, implying narrow 8-10 per cent margins, based on estimated breakeven of S$770-820 psf.

Active participation by smaller/foreign developers echoed past tenders (eg, Jervois Road, Hillview Avenue and other EC sites) and continues to bolster participation and push up land prices. Larger developers OUE, SingLand and Frasers trailed behind at 16-26 per cent below the top bid.

Strong demand for sites and robust private home sales continue to heighten policy risks. Stay "neutral" on the sector. CapitaLand is our top pick and City Developments is rated "underperform".

Sector - NEUTRAL

by JAMIE LEE