See why the Westwood Avenue land parcel attracted an "overwhelming" response

Strong participation rate of 12 bidders explained.

The first tender closing for an Executive Condominium (EC) site, after the introduction of new measures for EC developments, continued to draw overwhelming responses with 12 bids.

The measures, which are in effect after 10 December 2013, include a cap of the Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions for EC units bought directly from property developers at 30% of a borrower’s gross monthly income and the imposition of a resale levy for second-time applicants, according to Colliers International.

Colliers assessed that the highest bid at $198.9 million submitted for the site located on Westwood Avenue is bullish by market expectations. The top bid was by a consortium of Changi Properties Pte Ltd and Heeton Homes Pte Ltd, reflecting S$382 per sq ft per plot ratio (psf ppr), which is 0.5% and 10% above the second and third highest bids, respectively.

Ms Chia Siew Chuin, Director of Research & Advisory at Colliers International, explained that the strong participation rate, as well as the close competition among the top bids, signifies that developers still believe that the EC market is undersupplied, notwithstanding the recent change in the MSR policy.

Although the Government has imposed a maximum size guideline of 160 sq m for ECs, there is no restriction on how small these units could possibly be when developed. Given the bullish top bid of S$382 psf ppr, it would not be unreasonable to expect that the developer would include a significant proportion of smaller-than-average-family-size units in a new development on the subject site to improve the price affordability of the units.

Colliers International also noted that demand could come from eligible buyers who also work in the nearby Nanyang Technological University and the industries in the Jurong West/Tuas areas, as well as upgrader demand from the HDB estates in Jurong West.

At a land price of S$382 ppr psf, the estimated break-even cost could range from S$650-720 per sq ft. From July to December 2013, the median price of units selling at the adjacent The Floravale is S$724 per sq ft. Hence, when units at this project are ready for launch, the selling price could start from S$800 per sq ft, said Colliers International.