Developers cutting back on tenders

Developers are showing signs of being "more prudent" in their bidding for new land sites, says DBS Vickers.

Yesterday saw a "fair value" bid for a site at Tampines, said the brokerage firm.

"EC site at Tampines closed with 6 bids. The tender for an EC site at Tampines Aevenue 8 closed yesterday attracting 6 bids of between $228 and $302 psf ppr. A tie-up between Hoi Hup Realty, Sunway Developments and SC Wong Holdings emerged as the top bidder with a price of $187.6 million or $302psf ppr. The 221,736sf site has a GFA of 620,862sf. Hoi Hup plans to develop a 16-storey project with 575 units. About 60 per cent of units will be three-bedroom compact apartments of slightly over 1,000 sq ft; 20 per cent will be two-bedders; slightly more than 10 per cent will be dual-key units comprising a studio unit
attached to a two-bedder. The rest will be four-bedders."

"Winning bid is at fair value. The winning bid was about 8.6% higher than the second highest offer of $172.8 million or about $278 psf ppr by Frasers Centrepoint and Lum Chang Building Contractors. City Developments unit Grand Isle Holdings bid $260 psf ppr and EL Development offered $239 psf ppr. We think the top bid for the site was at fair value and is broadly in line with our earlier estimates of between $250 and $300 psf ppr. The group intends to price the units at below $700 psf and estimated its breakeven cost at slightly over $600 psf. This would translate to a 10 - 15% profit margin."

"Developers will continue to be more prudent in their bids. Going forward, we expect more realistic bids from developers compared to those seen early this year due to the large availability of mass market sites in the GLS. In addition, the release of new HDB and DBSS public housing units meant that pricing pressure would be more felt in the mass housing segment and we expect limited upside in prices in this segment in the medium term."

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