Published September 10, 2009

URA's Serangoon Ave site likely to draw strong bids

Higher expectations follow robust bids at Dakota Crescent tender this week


URBAN Redevelopment Authority yesterday launched the tender for a 99-year condo plot at Serangoon Ave 3. Market watchers expect top bids to be towards the upper band of the range of prices they predicted two weeks ago when URA first revealed it had received a successful application for the site, which was in the reserve list.

Launched: The Serangoon Ave site is next to Lorong Chuan MRT Station and near the Australian International School

The revision follows the strong showing at Tuesday's state tender for a condo plot at Dakota Crescent, which drew 13 bids. URA said yesterday it has awarded the land parcel to UOL Development (Novena) Pte Ltd, which placed the highest bid of about $329 million or $508 per square foot per plot ratio (psf ppr).

URA also announced an Oct 7 closing date for the tender of the latest plot at Serangoon Ave 3, next to Lorong Chuan MRT Station and near Australian International School.

A fortnight ago, property consultants polled by BT generally predicted top bids for the plum site to be in the $350-450 psf ppr range, with resulting breakeven costs of about $700-850 psf and target selling prices of $800-1,100 psf on average.

Yesterday, DTZ executive director (consulting) Ong Choon Fah predicted the highest offer for the land parcel will probably be towards the $450 psf ppr mark.

Colliers International executive director (investment sales) Ho Eng Joo too is betting that the winning bid will be around the $400 psf ppr level, or the higher end of the $350-$400 psf ppr price band he predicted earlier.

However, most consultants said they are not expecting run-away prices for this site. Knight Frank chairman Tan Tiong Cheng points to greater competition from nearby existing private housing stock for a new condo on the Serangoon Ave 3 site compared with a new project on the Dakota site.

Also, a condo project in the Serangoon area will appeal more to families and therefore have a bigger proportion of larger units.

This will also put a cap on the per square foot pricing that its developer will be able to charge buyers.

This is unlike UOL's strategy for the Dakota plot, where at least half of the units will be smaller two-bedroom units, which will allow it to push for a higher psf selling price.

Next Thursday (Sept 17), URA will close the tender for another plot - a commercial and residential plot at the corner of Yio Chu Kang and Seletar roads. 'Those who missed on the last couple of tenders will become sharper in their pricing for the next few land tenders,' says Knight Frank's Mr Tan.

Since July 20, the government has announced the successful trigger of four sites in the reserve list. The first, a condo plot at Chestnut Ave, was bought by Hong Leong Group for $280 psf ppr.

Market watchers expect developers to make successful applications for the release of further sites on the government's reserve list for the current half.

'The mass-market is where the confidence is right now; there are many developers who have not secured sites in this segment,' says Credo Real Estate managing director Karamjit Singh.

Despite the government last week raising the 'definite possibility' that it will restart confirmed list land sales from first-half next year, property consultants believe some developers will still press on with making applications to release more sites from the H2 2009 reserve list.

'If they like something on the current reserve list, why wait? After all, they don't know what sites will be in the H1 2010 confirmed list,' said DTZ's SE Asia research head Chua Chor Hoon.

Confirmed list sites are launched according to scheduled dates; reserve list sites are released only upon successful application by a developer with an undertaking to offer a minimum acceptable price.

Some market watchers expect that when government restarts the confirmed list, it will be 'very calibrated'.

BT understands that developers continue to urge the government not to revive the confirmed list, arguing that the reserve list is working well. However, analysts point out that it takes a longer time for a reserve list site to make it to the market as someone first has to make a successful application. 'If no one triggers a site, it can sit on the backburner,' says DTZ's Mrs Ong.

'The confirmed list is pretty much in your face. There is greater certainty. It's a faster time to market,' she adds.

'The psychological message that the government sends out by restarting the confirmed list - of ensuring there will be sufficient supply of land for private housing development - can also be quite powerful.'