SINGAPORE, 4 April 2023 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on the tender closing for Lentor Gardens GLS site.
The tender for the Lentor Gardens GLS site drew only one bid, from a joint venture between GuocoLand and Hong Leong. The bid price of $486.8 million translates to a unit price of $985 psf ppr, which is the lowest land bid within a year for a suburban GLS plot since the $980 psf ppr bid for the Dairy Farm Walk site in March 2022.
The muted participation, or lack thereof, by developers reflect multiple concerns. For one, future buyers would be spoilt for choice with the huge supply of homes that could spring forth in the Lentor vicinity, where no fewer than six plots offering up to 3,000 homes would be offered in two years. Other factors which might have also tempered interest in the site include the reduction in saleable area by developers from recent policy tweaks, and the additional two percentage points in stamp duty payable post-Budget 2023. The clouds of economic and geopolitical uncertainty, coupled with elevated borrowing costs and tighter leverage limits could also temper eventual buying demand for the project. Developers could also have factored that the enhanced HDB resale grants might draw some buyers back to the public housing market. Some smaller developers may also have shied away from bidding, given the stronghold of established players like GuocoLand and Hong Leong which have individually or jointly been awarded three of the four sites launched earlier.
The latest acceleration of private home price growth in 1Q 2023, based on URA’s flash estimate released yesterday, would have given little cheer to developers as it could invoke a policy reaction, if prices are increasingly misaligned with economic fundamentals. On the whole, the modest bid price by GuocoLand and Hong Leong reflects a cautious approach to maintain their market presence, while ensuring that they can price the eventual units in an affordable, yet profitable manner. Amid the challenging business climate, the outcome of this tender could set the tone for the other tenders ahead and cautious bidding is likely to be the name of the game.
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