Aggressive foreign developers outbidding cautious locals in residential land tenders

Future asset value growth will be compromised.

Local developers have been elbowed out of recent residential land sales exercises due to aggressive bids from foreign developers.

This is perfectly illustrated by a recent tender awarded for a residential site at Tampines Avenue 10.

The tender was awarded to MCC Land, a subsidiary of the Metallurgy Corporation of China, which is listed in Hong Kong and Shanghai.

“The winning bid has a 7 per cent premium over the second bid, reflecting the competitiveness of the bids. At the same time, it reflects the winning bidder’s attempt to strengthen their presence in this location. The plot is an extension of the regional centre of Tampines, stretching its foothold with a new private residential enclave in this precinct,” said Desmond Sim, Head, CBRE Research, Singapore & South East Asia. 

Jefferies Singapore equity analyst Krishna Guha noted that foreign developers seem more optimistic compared to their local peers.

“The [Tampines] transaction reflects a more conservative stance taken by the developers, something that has been ongoing for some time,” Guha noted.

He added that this trend does not bode well for local developers’ future net asset value growth

Clearly, foreign developers are still unreasonably optimistic, in our view. While we like that domestic developers like City Developments are bidding cautiously and staying on the sidelines, it will pose a headwind for future NAV growth from the SG residential segment,” Guha stated.