Land prices rocketing higher via GLS

Believe it or not, via the Government Land Sales (GLS) Programme, a site zoned for mixed-use at Yishun Central 1 drew a stunning top bid of S$1.43 billion when it closed on 5 Sep 2013.

The plot of land next to Northpoint have been sold to North Gem Development and FC North Gem Trustee, units of Frasers Centrepoint, for an amount which translates to a price of S$1,077 psf ppr. Though reports have estimated a selling price of average S$1,350 to S$1,450 psf, in my opinion, the developer’s primary focus will be on the commercial element, generating consistent rental income like what they’ve been doing from all their major malls. Thus residential may end up having a different price point.

This land bid indeed sets a new benchmark in pricing for upcoming GLS. However, some may feel that Frasers have paid too much it. You will probably see the market interest heading “south” in coming months, and i mean in terms of location.

Let’s look at the numbers and prices of 3 other major land parcels being sold this year in 2013.

Site at Kim Tian Road drew a top bid of S$1,162.86

This GLS probably caught the most attention in the property market in April 2013.

The top bid seriously didn’t make any sense at that point of time, considering the fact that in the early part of the year, on 11 Jan 2013, the Government announced the revised ABSD rates applicable to purchases or acquisitions of residential properties. In a nutshell, property buyers will have to pay more stamp duty for any residential property purchases from then on.

While property buyers were still trying to face this hard truth, Keppel Land displayed huge confidence in Singapore’s property market by offering such a high price for this piece of land near Tiong Bahru MRT Station. If you look even closer, do note that the Top 5 bidders are all the “Big Boys”. The other 4 developers are namely Far East Organisation, City Developments in partnership with Hong Leong Holdings, CapitaLand and UOL.

If it’s only Keppel Land, together with another Big Boy bidding for this land, you may think that they are insane. However, the truth is that it has attracted several strong developers’ attention to give a shot at owning the land parcel, ranging from a hefty S$470 to S$550 million.

Being located at the fringe of the Central Business District (CBD), being well-connected by public transportation and well-served by a wide range of amenities, it will probably be a good bet. However to make any money of out this development, Keppel Land may have to sell at an average of S$2,000psf. It all remains to be seen and probably soon.

Top bid for CBD land parcel works out to $1,112.44 psf ppr

This GLS exercise didn’t create a big hoo-ha in August 2013. Mainly because of the fact that it is located at city centre, CBD area, the price made perfect sense.

However we can see the aggressiveness of Frasers Centrepoint and their confidence for the CBD, by topping their next competitor’s bid by a significant 18.8%!

Past commercial launches such as Oxley Towers, EON Shenton, PS100 and SBF Centre, did generate huge interest and demand from the market, especially for its Offices and Shops. Frasers is probably looking to have a bite of the cherry as well.

Bid of S$1,157 psf ppr tops all for Mount Sophia site

Since when was the last time you see a GLS happening in prime District 9? Land being rarely released for sale in this area, this is seriously a good deal for the consortium comprising Hoi Hup Realty, Sunway Developments and S C Wong Holdings.

A huge land size of 23,771 sq metres, this future development will be the biggest residential project in Mount Sophia.

With units likely to be selling at estimated S$1,900psf, we will be anticipating how Roxy Pacific Holdings will price their upcoming freehold development, LIV on Wilkie.

What does all these spell?

1. Prime area gains favours

By looking at the numbers, you can be sure that pricing of suburban areas will eventually catch up with core central regions. May not be on par, but it will still be relatively close…probably by a good $300-$400psf on average.

If this is the way that the market will move, it will certainly benefit the prime districts 9, 10 and 11. Probably not the super high-end luxury developments. Something perhaps more affordable for most property buyers.

Because of the fact that the PSF pricings between the Core Central Region (CCR) and Outside Core Region (OCR) are relatively close, most property buyers or investors would rather pay a little bit more to own something in prime city centre. Even when you compare the GLS between Mount Sophia and Kim Tian Road, doesn’t the Mount Sophia plot looks like a much better deal for developers?

Here’s something interesting to think about:

BMW, Mercedez, Audi and Volkswagen are selling more cars than Honda, Toyota, Hyundai and Nissan??

If this is how the automobile market is reacting, it’s pretty obvious what the property sentiment will be if CCR and OCR pricing gets too close. For example, if given a choice, would you pay S$700,000 for a property in Jurong, or S$850,000 for a similar scale property in River Valley?

2. Pricing likely to continue heading north

One of the best ways to analyze market trend would probably be looking at the prices of government land being sold.

As we all know, Singapore a just a tiny little red dot on the world map. We do not self-produce some of most important natural resources to aid our growth. We mainly depend on import and exports.

Land is all we have, and we don’t have much of it. When land is scarce, it’s going to worth even more. In a nutshell, if developers are not buying “cheap” land, how are they going to sell you “cheap” property?

To build a brand new development, there are more expenditures to bear, other than just the land cost. There’s construction cost, development charges (which by the way just went up again), legal cost, taxes, marketing cost and others.

Developers are businessmen. The truth is that they are not a charitable organisation. They want to make profits and sustain their business. As Singapore’s inflation edges higher, these relative costs will increase as well. Therefore it’s unlikely that developers will want to short sell their developments.

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