Firm Home Sales Lure Bidders Out for Government Land Sales

Healthy home sales in the past five months whittled down property developers' inventory, which has in turn boosted their appetite for land.

This came through in the stronger-than-expected top bids for two 99-year leasehold sites at state land tender closings on Thursday. The absolute price quantum, deemed relatively palatable for developers, helped boost their attraction in what was the first residential Government Land Sales (GLS) tender closing since the Phase 2 re-opening of Singapore's economy following partial lockdown imposed to contain Covid-19.

Of the two plots, the more hotly contested one is next to Tanah Merah MRT station at Tanah Merah Kechil Link.

The site, zoned for residential, with commercial units on the first storey, drew 15 bids. The top bid by MCC Land (Singapore), part of a diversified Chinese state-owned enterprise, was S$248.99 million or about S$930 per square foot per plot ratio (psf ppr). This was 4.6 per cent higher than the second-highest bid by a tie-up between City Developments Ltd (CDL) and TID.

The other plot, an executive condominium (EC) housing plot in Yishun Avenue 9, fetched seven bids.

The top bid from Sing Holdings came in at S$373.5 million or S$576 psf ppr; this was 8.9 per cent above the second-highest bid from a partnership between CDL and Hongkong Land subsidiary MCL Land.

CBRE's head of research for Southeast Asia, Desmond Sim, said: "Given the environment of rising construction costs, the respective bid prices are likely to set new benchmark S$psf launch prices for their respective markets and asset classes in the future."

ERA Realty's head of research and consultancy, Nicholas Mak, estimates MCC Land's breakeven cost for the plot in Tanah Merah Kechil Link to be between $1,480 and S$1,540 psf.

Showsuite Consultancy's chief executive, Karamjit Singh, commented that the top bid would require the developer to sell the new apartments for about S$1,700 to S$1,800 psf, which is "bullish, considering that new units in that area are currently trading at between $1,500 psf and $1,600 psf."

Tan Zhiyong, chief executive of MCC Land (Singapore), said: "We are very confident of developing an exciting residential landmark with about 2,000 sq m of retail space on this relatively sizeable site. It will be a highly liveable environment brimming with smart and sustainable features."

The company is a subsidiary of Metallurgical Corporation of China, a Fortune Global 500 company listed in Hong Kong and Shanghai.

JLL Singapore's senior director of research and consultancy, Ong Teck Hui, noted that the residential component of the Tanah Merah project is likely to be launched in late 2021, when buying demand could improve further alongside expected economic recovery. Similarly, many projects have delayed launching to 2021 instead of 2020. One such is Irwell Bank Residences at Irwell Bank Road.