The piece of 99 yr leasehold land at Dakota Cresent has been sold to UOL, one of 13 bidders for the tender.
The article below gives an interesting breakdown:
1. UOL buy the land from the govt at $430 per square foot per plot ratio.
2. UOL plans to sell smaller units priced at $1000-$1050 per square foot.
3. UOL's breakeven selling price is $920 per square foot.
Based on these numbers UOL makes a profit of about 10% of the selling price of each unit. Given the risk it has taken given the economy can turn down by the the time it markets the condo, a 10% return is fair. Construction cost is about 10-15% of price (yes, a $800K condo cost about $80K to build). The bulk of it about 75%-80% is the cost of land which is sold by the govt to the highest bidder. Rising land cost is something Singaporeans cannot run away from (if they want to remain as Singaporeans). If you're Japanese and can't stand the cost of living in Tokyo, you can just pack up and go to one of the many prefectures which the cost of living is probably lower than in Singapore. If you are American and can't stand the cost of living in New York, you can go to California. In Singapore, we have no choice. That is why it make sense to have HDB sell affordable housing to Singaporeans - affordable meaning it is priced relative to income levels and general employment stability. But HDB's selling price based on the market and that has led to all sorts of problems for Singaporeans.
A total of 13 bids were received, reflecting developers' voracious appetite for mass-market and mid-tier private housing land.
The top bid from UOL Group was above market expectations of about $420-450 per square foot per plot ratio (psf ppr) just a few days ago.
UOL's price yesterday was slightly more than $329 million or about $508 psf ppr - just 3 per cent shy of the $524 psf ppr that Ho Bee and NUTC Choice Homes paid during the peak in June 2007 for the plot next door on which they are developing Dakota Residences, which has achieved an average selling price of about $970-980 psf. However, after taking into account changes in planning regulations since then, whereby planter boxes and bay windows are not exempted from gross floor area calculations, UOL's bid yesterday is probably higher than the equivalent 2007 bid for the next-door plot, some market watchers say.
BT understands that UOL is gunning for a high proportion of smaller units in its proposed scheme, and thus push for a higher average selling price of about $1,000-1,050 psf. 'They should be able to achieve this kind of psf price - so long as they keep the absolute price quantum within an affordable range,' an industry observer said. BT understands UOL's breakeven cost will be about $920 psf.
When contacted, UOL chief operating officer Liam Wee Sin said the group plans to build about 550-600 units, with at least half likely to be two-bedroom apartments. The 18-storey project will be launch-ready around mid-2010, he added. Analysts felt that most bidders would not build a basement in their scheme for the site to minimise construction costs given the marine soil on the site, which fronts Geylang River. Said Mr Liam: 'Our bid assumptions were based on current pricing. And this is one of the more choice plots on the current Government Land Sales Programme.' 'UOL's Singapore residential development business has grown to be a very important growth engine for the group. And having successfully launched two projects this year - Meadows @ Peirce and Double Bay Residences - we need to acquire more land to sustain this growth-engine,' Mr Liam added. The group will continue to be on the lookout for more residential sites in Singapore, he added. Analysts note that the supply pipeline for mass-market homes, particularly those on 99-year sites bought at state tenders, has dwindled rapidly in the past six months, aided by the suspension of the confirmed list state land sales since October last year and strong home buying in this segment since February.
Credo Real Estate managing director Karamjit Singh said: 'The rally in the mass and mid-tier markets probably has another one-and-a-half or two years to run - assuming there's no intervention by government to cool demand or any negative external factors coming into play. That's something that developers are beginning to appreciate, which is why the participation rate at today's tender is very high,' he added. 'The bottomline is that $508 psf ppr is still a very viable proposition for the developer as the site has qualities that appeal to this segment of the market - proximity to an MRT station and amenities,' Mr Singh added. UOL's $508 psf ppr bid was 5.4 per cent higher than the next highest offer by GuocoLand of almost $482 psf ppr. Frasers Centrepoint bid about $462 psf ppr. Four other bids were above $400 psf ppr. A unit of Lippo group posted the lowest bid of $247 psf ppr. The highest bid was 2.53 times the minimum price of $200.74 psf ppr for the plot, which is from the government's reserve list. Such sites are launched for tender only if there is a successful application by a developer with an undertaking of a minimum offer acceptable to the state. Confirmed list sites on the other hand are launched for tender according to scheduled dates, which could translate to more residential property launches. By some estimates, developers have raised prices of mass-market projects by about 10-15 per cent from the January-February lows.