Spread between top two bids exceeds $100m for two sites this year, up from one last year


(SINGAPORE) Plum sites with tenders that closed shortly after the introduction of property cooling measures have produced some of the biggest spreads between the top two bids since the start of last year.

Market watchers say this was due to a bigger divergence of views among developers on the impact of the measures following their introduction.

Two government land sale (GLS) sites with private residential components so far this year have already fetched winning margins – the spread between the top and second highest bids – exceeding $100 million. There was only one such case for the whole of last year, according to Jones Lang LaSalle’s analysis.

The two land parcels in the ‘$100 million club’ so far this year are a mixed development site at Punggol Central/Walk near Punggol MRT Station and a plum condo site near Bishan MRT Station.

The top bid for the Punggol site by a consortium comprising Far East Organization, Frasers Centrepoint and Sekisui House was $171.2 million or 20 per cent higher than the next highest bid.

For the Bishan site, CapitaLand paid about $117.8 million or 27 per cent more than its closest competitor in the tender. In percentage terms, these winning margins have also been the highest so far this year.

The tenders for the Punggol site closed on Feb 15 and that for the Bishan site closed on Feb 24 – the first two tender closings involving sites with private residential components following the announcement of property cooling measures on Jan 13 this year.

Last year, the only site which attracted an over-$100 million winning margin was a plum mixed development plot next to Bedok MRT Station. It was awarded to a tie-up between CapitaLand Residential Singapore and CapitaMalls Asia which paid about $789 million – or some $138 million or 21 per cent more than the next highest bid.

The tender for that site closed on Sept 1, two days after the government announced cooling measures on Aug 30.

In all, since the start of 2010 there have been five cases involving winning margins exceeding 20 per cent – of which four were shortly after the introduction of cooling measures.

Credo Real Estate executive director (research and consultancy) Ong Teck Hui said: ‘I think this is probably due to uncertainty after the announcement of each set of measures.’

‘Some developers may be more optimistic while others may feel more pessimistic. It boils down to how different developers read the market after the measures. It’s very difficult to assess how the market is going to move forward; as a result, views could be very disparate.’

Despite the general trend of biggest winning margins immediately after the announcement of cooling measures, the highest percentage winning margin of 31 per cent since the start of 2010 was for a plot at Miltonia Close (next to Orchid Country Club) clinched by a Hoi Hup-Sunway Developments tie-up that closed on Aug 24 last year, about a week before cooling measures were announced on Aug 30.

Jones Lang LaSalle’s head of South-east Asia research Chua Yang Liang suggests there may be a relationship between winning margins at state land tenders and the spread between median prices in the primary and resale markets for non-landed private homes outside the prime districts 9, 10 and 11.

‘In a weakening market such as when the new and resale market gap is low (Jan to May 2010), the bids received for development land should become tighter and gravitate towards a mean, that is, where developers’ outlooks become increasingly similar,’ he said.