Feb 21, 2007

Smaller sites snapped up in new wave of collective sales

Developers eye suburbs on hopes of a recovery in mid-tier segment

By Fiona Chan

LARGE homes in prime areas may be all the rage, but some developers have quietly turned their attention to smaller sites outside the high-priced central districts.

These bite-sized estates in popular residential suburbs are being swept up in a new wave of collective sales.

At least 12 such estates have successfully gone en bloc since last November, each costing below $70 million and weighing in at less than 100,000 sq ft.

Consultants suggest that developers may be stocking up on these relatively cheap sites in anticipation of a recovery in the mid-tier property market, which has been trailing the high-end segment.

'There's quite a bit of confidence that from this year onwards, there will be a broader-based recovery across districts,' said Mr Karamjit Singh, managing director of Credo Real Estate.

'Developers are positioning themselves ahead of that recovery by buying these sites.'

Most of the sites sold recently, while not in prime areas, are well poised to ride the upswing in the property market, say industry watchers.

They are mainly located either on the city fringe or in sought-after suburbs such as Bukit Timah and East Coast.

Sing Holdings, for instance, bought Bellerive in Bukit Timah and Finland Gardens in Siglap in December. Last month, Far East Organization picked up land parcels in Bukit Timah Road/Keng Chin Road and Amber Road.

Experts say these districts are likely to benefit from the next wave of home price rises, as buoyant home buying filters down to the lower tiers.

For a number of these smaller estates, their first attempts at going en bloc last year saw lacklustre interest by developers caught up in luxury home fever.

But success came on their second try - even though some, such as The Albany in Thomson Road, had raised their asking prices.

Mr Jeremy Lake, executive director of investment properties at CB Richard Ellis, said this 'second time lucky' phenomenon is not surprising as 'market sentiment has continued to improve'.

'There is a stronger perception now that the recovery will spread to the fringe areas, and therefore maybe developers are taking a second look at the sites they overlooked six or nine months ago,' he said.

Mr Lake also suggested that some developers may think these fringe sites offer better value than those in prime districts, where land prices have soared in recent months.

'I don't think any site looks cheap these days, but some developers may want to look somewhere else that is more competitive or where the market hasn't shot up so much yet,' he said.

This is especially since most of the buyers of these smaller sites are smaller players without large cash hoards.

But there are also major players getting in on the suburban action.

With more cash to spare, they are picking up larger sites such as Flamingo Valley in Siglap. The 335,161 sq ft site was bought by Frasers Centrepoint for $194 million earlier this month.

Two large former Housing and Urban Development Company estates, Gillman Heights in Alexandra Road and Minton Rise in Hougang, were also sold recently. CapitaLand and Kheng Leong respectively bought them after they had been on the market for months with no takers.

Given the keen interest in sites of all shapes and sizes, Mr Singh offers a more prosaic reason for the new wave of suburban collective sales.

'The en bloc market is really supply-driven. A lot of the transactions are based on the availability of stock,' he said.

'It's not so much demand for this area and lack of demand for other areas, it's just that developers are picking up whatever's on the market as long as it makes sense.'

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