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Developers show caution in bids for Sims Drive site

SINGAPORE — In yet another sign that developers are taking a more cautious stance when vying for land amid challenging property market conditions, a residential site at Sims Drive attracted only four bidders, who put in relatively conservative offers.

SINGAPORE — In yet another sign that developers are taking a more cautious stance when vying for land amid challenging property market conditions, a residential site at Sims Drive attracted only four bidders, who put in relatively conservative offers.

The 99-year leasehold site, which is spread across 257,251sqf and has a maximum gross floor area of 771,775sqf, is the largest condominium site to be released under the Government Land Sales programme since early 2012, analysts noted.

But the sheer size of the development has also probably deterred developers, especially small-to-mid-sized ones, from participating in the tender. The site can potentially yield 900 homes.

Said Mr Nicholas Mak, executive director of research and consultancy at SLP International: “This is a very big development and not many developers have the financial muscle to see the project through. That’s why we see mainly the big boys bidding.

“However, the current conditions play a part as well, because during good times, the medium-sized developers would form consortiums or joint ventures to take part.”

Ms Christine Li, head of research and consultancy at OrangeTee, agreed: “Bigger projects would invariably carry bigger risks, and this applies especially so during challenging market conditions.”

The top bid of S$530.9 million was placed by First Changi Development, a unit of GuocoLand.

This translates into about S$687.90 per square foot per plot ratio (psfppr), edging out the second-highest bid of S$650.45 psfppr by a City Developments-led consortium.

“Comparing the tender result of the subject site with that of the Geylang East tender, developers have exercised greater caution when bidding for the Sims Drive parcel,” said Ms Li.

The January tender for a Geylang East Avenue 1 site only 400m from the Sims Drive plot was hotly contested with 16 bidders. It was eventually sold to S L (Serangoon) for about S$776.00 psfppr.

“The growing caution among developers is not surprising, given that the private residential market has weakened for the second consecutive quarter,” said Mr Mak. He estimated the breakeven price to range from S$1,090 to S$1,130 per square foot and the selling price to start from S$1,220 to S$1,300 per square foot. LEE YEN NEE

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