Interest in residential land picks up

But market for en bloc sales is not going to take off just yet, say property analysts

The year’s only collective sale tender so far has closed with more than one interested bidder, indicating demand for residential land may be returning.

Dragon Mansion, at 18 Spottiswoode Park Road, was last month the first collective sale site to be launched for sale this year.

The freehold site, which is more than 30 years old, is designated for residential use with a plot ratio of 2.8 and could potentially yield an estimated 120 units of 1,000 sq ft apartments in a new development.

CKS Property Consultants, which is marketing the site, said it saw interest from developers because ‘basically there are no freehold collective sale sites on the market right now’.

However, the firm declined to comment if the asking price of more than $120 million had been offered.

‘Developers are still cautious at this moment because there is no way to tell how the market moves, so they are still price-sensitive. There are no transactions yet, so it’s hard to tell,’ said CKS.

Property consultancy Credo Real Estate said last month that some five to 10 collective sales may take place this year, but they will probably involve small to mid-sized sites. Dragon Mansion, at 41,874 sq ft, is considered such a site.

Ms Chua Chor Hoon, property consultancy DTZ’s head of South-east Asia research, said: ‘In this economy, the appetite is for smaller, more digestible pieces of land, simply because they cost less.’

To be sure, the collective sale market is not going to take off right away, say property analysts. Since the collapse of Lehman Brothers, the number of en bloc sales has fallen like a house of cards – from 116 collective sales completed in 2007 to just eight last year.

Said Ms Chua: ‘Interest is returning from developers because they sold so many units in the last few months. Some of them need to replenish their land banks.

‘But for collective sales, time is needed to put together the sales committee and get the required quota of people to agree to sell. If this process has not started by now, it’s unlikely the sites will enter the market this year.’

The good news is that private home sales have been on the rise since February, leading to greater optimism in the industry. Developers sold 1,825 new units in June – more than double the number sold a year ago.

A research note by the Royal Bank of Scotland Asia Securities Singapore said ‘the residential market is peaking’, as prices for private residences rose 16 per cent to 26 per cent last month from March lows.

It also said this was ‘driven by a 200 per cent year-on-year surge in primary volumes that, when annualised, matched 2007 record levels’.

This newfound optimism in the market has prompted a 20-storey freehold residential development located at 320 Guillemard Road to be put up for sale by expression of interest last Wednesday.

Cassia View, which is owned by the Lee family of Hotel Royal, sits on a 35,511 sq ft site and comprises 72 two- to three-bedroom apartments and penthouse units, with a total strata area of 89,362 sq ft.

Property consultancy Colliers International, which is marketing the property, said it has received nearly 10 preliminary inquiries about the site and expects to have at least three serious bids by the time the offer closes on Sept 2.

Mr Ho Eng Joo, executive director of investment sales at Colliers International, said: ‘Right now there are not too many freehold sites on the market. The successful buyer could either redevelop the property or carry out minimal refurbishment works on the property and put the individual units up in the market later for strata sale.’

He also pointed out: ‘Demand has been so strong that even the Government’s reserve sites have been triggered for sale.’

Three government land parcels were triggered for sale in the last month, after developers indicated interest by committing to minimum bids.

They are plots located at the corner of Yio Chu Kang and Seletar roads (the minimum bid is $40.5 million); at Dakota Crescent, near the upcoming Dakota MRT station on the Circle Line ($130 million); and Chestnut Avenue in Bukit Panjang ($62 million).

CB Richard Ellis executive director Jeremy Lake said: ‘The fact that private-sector land is not readily available and not easy to obtain means bidding for these plots will be very competitive.

‘Each may get more than 10 bids perhaps, and pricing should surprise on the upside rather than on the downside.’

He added: ‘As for collective sales, a few months ago, they were a non-starter. If Dragon Mansion is successful, it may be a positive sign for the market.’