RESIDENTIAL MARKET
Sengkang condo site draws just 5 offers
THE state tender for a 99-year private housing site near Sengkang MRT Station and Compass Point mall yesterday drew just five bids.
However, the top bid - of $383.333 million or $527.65 per square foot per plot ratio (psf ppr) by EL Development - was about 10 per cent higher than the second highest bid and 5 per cent above the price that Keppel Land paid for the next-door plot in March last year.
Some observers suggest EL Development's top bid reflect its strong appetite for land - two days ago it lost out to MCL Land in the tender for a plum condo plot near Jurong East MRT Station by just 0.08 per cent or 55 cents psf ppr.
However, the muted turnout at yesterday's tender, with just five bids - compared with nine for the next-door plot last year - could be be due to considerable supply coming out in the Sengkang/Punggol vicinity, which would intensify competition in the location, say property consultants.
EL Development managing director Lim Yew Soon yesterday evening told BT the firm's beakeven cost for a new condo on the Sengkang plot tendered yesterday would be be about $900 psf and indicated he is
On the next-door site tendered last year, KepLand is developing a 622-unit condo, The Luxurie, which was close to 60 per cent sold based on April developer sales data released by Urban Redevelopment Authority, industry players noted yesterday.
KepLand released The Luxurie in August last year, selling 151 units at a median price of $1,053 psf in that month. In April this year, it sold 34 units at a $1,042 psf median price. As at end-April, 356 of the 400 launched units were sold.
When the tender for the latest plot was launched in April, property consultants had forecast that the top bids could come in at $400-550 psf ppr.
Source: Business Times – 1 June 2012
INDUSTRIAL MARKET
Buoyant strata sales raise challenges
The industrial property segment probably benefited more than the office and retail segments after investors were diverted to non-residential sales following the Government's measures to cool the housing market last year.
As many strata industrial properties can also be used partly for offices, it appears that the demand base is fairly wide. Although the office use should be for related businesses or in approved office-cum-industrial spatial portions, there are some who may have bypassed the rules, creating a perception that such uses can be explored for new property owners and investors.
The past decade has nurtured numerous industrialists who are more financially confident in buying their own properties for business operations. In light of rising rentals, many businesses are looking to purchase industrial properties to have better control over business costs.
Conversely, there are some businesses that seek opportunities for "sale and leaseback", such that the cash can be used for their core businesses.
As many strata industrial properties can also be used partly for offices, it appears that the demand base is fairly wide. Although the office use should be for related businesses or in approved office-cum-industrial spatial portions, there are some who may have bypassed the rules, creating a perception that such uses can be explored for new property owners and investors.
The past decade has nurtured numerous industrialists who are more financially confident in buying their own properties for business operations. In light of rising rentals, many businesses are looking to purchase industrial properties to have better control over business costs.
Conversely, there are some businesses that seek opportunities for "sale and leaseback", such that the cash can be used for their core businesses.
Together these have contributed to ample buying interest and sellers' willingness to part with their property.
Sound economic fundamentals, a lack of restrictions like those in the housing market and the low price quantum set the stage for strong strata industrial property buying last year and the first quarter of this year. But the run-up in prices may have superseded economic fundamentals in the short term, as the rents envisaged by investors may not pan out as the economy experiences challenges in an increasingly jittery global environment.
Also, any tightening in industrial property regulations will defeat the investment objective of those who are considering renting to non-legitimate users to maximise returns. These landlords will have to switch back to a smaller pool of tenants and may not see their investments justified, as the price paid for the property was in anticipation of renting to tenants with bigger budgets.
As such, investments in industrial properties are unlikely to result in supernormal profit.
To attract or retain industrialists, owners of generic industrial properties will have to adopt flexible or competitive rental pricing.
Source: Today – 1 June 2012
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