URA releases two more GLS sites

Source : Business Times - 30 Apr 2008

THE Urban Redevelopment Authority (URA) has released two more residential sites through the Government Land Sales (GLS) programme. And while interest is expected to be good, profit margins for developers will be slimmer.

A 1.08 ha site at Woodleigh Close, with a maximum permissible gross floor area of 30,167 sq m (324,714.5 sq ft), is up for sale via the GLS confirmed list. Cushman and Wakefield managing director Donald Han reckons the potential profit margin for a developer could be about 12 per cent.

This is based on a land price of $350-$380 per sq ft per plot ratio (psf ppr), factoring in construction costs and an estimated selling price based on current project launches. In the vicinity, Mr Han says Parc Mondrian and Blossoms at Woodleigh are going for $700-$850 psf. Noting that profit margins were 30-40 per cent until the effects of the US sub-prime crisis and global credit crunch took hold late last year, Mr Han said: ‘In bad times, profit margins can fall into single digit figures.’

The point, however, is that profit can still be made. ‘It’s a matter of who can control costs better,’ he said. ‘Construction companies can control costs better, so for them, even a baseline profit margin of 8 per cent is feasible.’

Reflecting market volatility, Knight Frank director (research and development) Nicholas Mak believes the land price for the Woodleigh site could be $300-$370 psf. ‘If the market turns bearish within the next two months, the bids will be at the lower end,’ he said. He expects four to eight bidders will take part in the tender, including major developers.

URA has also released detailed sale conditions for a 2.08 ha reserve list site in Upper Thomson Road, close to Bishan Park and Lower Peirce Reservoir Park, for residential development. The site has a maximum permissible gross floor area of 43,758 sq m (471,006.7 sq ft).

Mr Han said new projects in the area are going for about $850 psf. Factoring in construction costs and a developers’ profit of 10-12 per cent, he expects bids to be $380-$400 psf ppr.

Separately, the Housing and Development Board has made available a reserve list site at Sengkang East Avenue and Buangkok Drive for an executive condominium. The 17,000.8 sq m site has a permissible gross floor area of 51,002.4 sq m.