Developers continued to bid strongly at the third Government Land Sales (GLS) residential site tender for the year, suggesting they are keen to replenish their land banks.
The tender for a plot at the junction of New Upper Changi Road and Bedok South Avenue 3 - the first reserve list site to be triggered for sale this year - closed yesterday with eight bids.
Given the development process, which includes getting planning permission, the sites that developers bid for do not hit the market for some time, noted Mr Desmond Sim, CBRE head of research for Singapore and South-east Asia.
Developers must secure their main raw material - land - to work on for the next three to five years.
"Yes, the market is looking challenging, but you have to look beyond that. Otherwise when the market turns, you have nothing to sell," he said.
Chip Eng Seng subsidiary CEL Residential Development topped the bids by a whisker - boosted by its recent success with High Park Residences, which has sold about 94 per cent of 1,390 units since launching last year.
CEL's bid of $419.38 million, or $761 per sq ft per plot ratio (psf/pr) was just 0.8 per cent more than the second highest by Malaysian tycoon Robert Kuok's Allgreen Properties, which placed a bid of $415.89 million or $754 psf/pr.
CEL is planning a condo of about 720 units, it said in a Singapore Exchange filing.
CEL's bid was just 3.8 per cent lower than the $791 psf/pr paid for nearby site The Glades in October 2012, at a time when the market was more ebullient.
This suggests CEL is confident of favourable market conditions when the project is launched for sale, said Mr Ong Teck Hui, JLL national research director.
"There are views in the market that economic conditions would improve by 2017 and cooling measures might be eased... This positive reading could be contributing to firm bidding... at GLS tenders."
Eventual breakeven costs could be $1,250 to $1,300 psf, while the developer could aim to launch the condo at above $1,500 psf, said Mr Nicholas Mak, SLP International executive director.
The Glades, by Keppel Land, has sold about 53 per cent of its 726 units. Both sites are near Tanah Merah MRT station.
Keppel Land also participated in the tender, with the bid by its joint venture with Sing Holdings coming in sixth at $375.3 million or $681 psf/pr.