There the fierce bidding goes again on Government Land Sales

Fierce bidding increases possibility of Confirmed List re-instatement, maintain OVERWEIGHT. The overwhelming 13 bids received for the Dakota Crescent site suggests that developers’ inventories are in dire need of replenishment after strong sales YTD. We believe this also reflects a sustainable sales momentum for mass and mid projects. Looking ahead, we expect the two already-triggered GLS sites (Yio Chu Kang and Serangoon) to draw similar demand, especially from developers who missed out during the past two tenders. More importantly, we believe this has all but confirmed the re-instatement of the Confirmed List next year. We reiterate our inclination towards landbank-rich developers who will be sheltered from overpaying for land given their adequate inventory at present to ride on the residential sales momentum. Amongst the big-cap developers, we like CityDev, while Wing Tai is our preferred proxy to the mid-cap space.

UOL emerged as the highest bidder for the GLS site along Dakota Crescent. While its bid of S$508 psf is within our estimates of S$450 – 500 psf, we note that this is almost close to the S$524 psf which Ho Bee and NTUC Choice Homes paid for a nearby site in Jun 07 (property peaked in 4Q07). The 185,000 sf site (GFA of 650,000 sf) could yield 550 units. We estimate a breakeven price of S$910 psf and selling prices of S$1,000 – 1,100, implying PBT margins of 10 – 20%. While this price range represents a premium over nearby Dakota Residences’ current S$850 – 950 psf, we reckon developers are attracted by: (1) proximity to upcoming Singapore Sports Hub, Marina Bay IR and CBD, as well as (2) accessibility through Dakota MRT Station in 2010. Further, we note that this is the only pure residential site on URA’s reserved list which is located close to the IR.

Competition was intense with 13 bidders, six of which missed out on the previous awarded site along Chestnut Avenue, i.e. Allgreen, F & N, Ho Bee and Sim Lian. More notably, bid prices were evidently more aggressive, with seven developers bidding at least twice the minimum bid as compared to Chestnut Avenue’s two. We attribute this largely to their fast-diminishing landbank, as well as knowledge of the high level of competition for land at present. Meanwhile, this could re-invigorate buying interest in nearby 348-unit Dakota Residences.


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