Are small land sites still attractive?

Tenders will keep on coming says Savills after a surprising turnout for a pocket residential site.

The Kovan Road / Simon Road residential site received 11 bidders despite the gloom-and-doom outlook on home sales.

Savills took this resilient bidding as representative of relatively smaller land parcels, which it expects to ride out the storm.

"With 11 bidders for this site, it shows that for land with bite sizes of less than S$200 million, will continue to attract a number of bidders," said Alan Cheong, Head of Research at Savills Singapore, in its comments to the tender closing.

"The healthy list of bidders from this and recent tenders also show that developers are confident, that their balance sheets are strong enough to weather through concerns that the ABSD will lead to abject market conditions," he added.

Mr. Cheong went on to analyze the cost implications for the winning bid, including a margin forecast hovering in the 40%.

"Our estimate for the project’s breakeven cost is about S$980psf. With 900 – 1,000sq ft units at Kovan Residences transacting around S$1,350 psf and the Bliss @ Kovan going for S$1,400 psf, the 37% - 43% margin is good enough for the top bidders to ride through the current soft patch. However, if this were to be a freehold site, the bid prices may be higher as the supply of freehold projects in the mid-to-mass market sector is limited," he said.