Bids likely to dip for en bloc sites

Bids likely to dip for en bloc sites

Developers eyeing collective sale sites might have to redo their sums as the Government caps the number of homes that can be built in non-landed developments outside the central area.

Experts say the newly announced guidelines that discourage the fast-rising number of tiny "shoebox" homes will likely temper developers' bids, particularly for certain small suburban collective sale sites.

This is because shoebox homes - typically less than 50 sq m - can often be sold at higher per sq ft (psf) prices.

Bids for upcoming sites would have to factor in the larger average size of units mandated under the new rules, which are usually expected to feature lower psf selling prices.

The experts add that smaller collective sale land plots are likely to be the most affected by this change as small and mid-sized developers often churn out more units on such sites to claw back the land cost.

Sites that do not have a gross plot ratio (GPR) of 1.4 and with a gross floor area of 30,000 sq ft to 80,000 sq ft will likely be the most affected.

These other sites might see bid prices fall by about 3 per cent to 5 per cent as developers turn cautious and scale back their aggressive bids.

Larger sites that cost more than $200 million are usually the target of bigger players who do not build just shoebox units, and so they might be less affected.

UOB Kay Hian analyst Vikrant Pandey noted that developers keen on riding the shoebox wave will become less aggressive both in acquiring collective sale sites and in their land tender bids for suburban land parcels.

This is likely to result in a change in strategy for developers of small mass market projects such as Oxley Holdings and Roxy-Pacific Holdings, he said.

But experts point out that the impact of the rules has also been muted by an earlier change in guidelines last November that sounded a warning that the Government was closely watching the shoebox segment.

New rules then had set minimum plot sizes for apartment blocks and restricted the number of units that can be built on certain sites, ensuring that some ground will be free for landscaping or facilities.

URA has also been stricter in granting provisional permission. It has been known to throw back building plans with too many shoebox units, sending a signal to the industry that changes were at hand, an expert added.

Source: The Straits Times – 6 September 2012