Maybank KimEng: Singapore land bids ‘subdued,’ show developer caution

The skyline in Singapore’s central business district.The skyline in Singapore’s central business district.

Singapore government land tenders for three sites, the first since the introduction of a fresh round of property cooling measures, had subdued bids and showed developer caution, Maybank KimEng said in a note on Wednesday.

That’s a stark contrast to comments from Daiwa on Tuesday, which said that aside from a lower participation rate, the land bids showed no evidence that the cooling measures have restrained bidding.

“We reiterate that the risk-reward for developing a residential project has turned unfavorable after the most recent cooling measures,” Maybank KimEng said, pointing to higher upfront costs due to the 5 percent non-remissible additional buyer’s stamp duty (ABSD).

Development risks are also higher as failing to sell all units within five years will attract a 25 percent ABSD penalty, up from 15 percent before the new cooling measures took effect on 6 July, the brokerage said.

It pointed to the absence of “several big players,” including CapitaLand, unlisted Far East, City Developments, GuocoLand and Hong Leong-linked entities and others, from the tenders for the two private residential sites.

“While we believe this partly reflects the sites’ less attractive locations, we think it mainly shows the caution of residential developers,” it said.

Maybank KimEng also noted that United Engineers, the top bidder out of only five for the Dairy Farm Road site, bid S$368.8 million, or S$830 per square foot, which when adjusted for the new 5 percent non-remissible ABSD to S$872 per square foot, marks an 18 percent discount to the S$1,068 per square foot paid for a nearby government land sale site in July.

It said it was staying neutral on the property sector due to the policy-tightening overhang, adding that for sector exposure, it preferred UOL, CapitaLand and Ho Bee.

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