GuocoLand sold 508 units, or 84% of Lentor Modern's 605 units, between September 16 and 17, at prices ranging from S$1,856 to S$2,538 per square foot (psf). Lentor Modern's success is the result of a strong response to recent leasehold condominium development releases in the Outside Central Region (OCR).
On September 7, approximately 75% of the homes at Sky Eden@Bedok were sold averagely at around S$2,100 psf. In July, 366 of 372 AMO Residence units in Ang Mo Kio sold for a median price of S$2,110 psf. Given the high demand for suburban condos, developers should be clamouring for land since developers must first secure landscape before they are able to build houses.
However, the government auctions for 99-year OCR plots that ended last week for two private home sites near Lentor MRT station and an executive condominium (EC) site along Bukit Batok West Avenue 5 received fewer bids than most property consultants had predicted. Four bids were received for the EC site in Bukit Batok. In a March tender that drew nine bids, the winning price for the next-door property was only around S$626 per square foot per plot ratio (psf ppr).
Rising mortgage rates and construction costs are putting a strain on developers' finance. Increased costs, on the other hand, will be meaningless if buyers are willing to pay higher prices. Perhaps developers are signalling in their land bids that private home prices have peaked, realising that the real estate market operates in cycles. Aside from the underwhelming response to state bids for OCR housing sites, premier residential en bloc selling sites Trendale Tower, 5 Oxley Rise, and Oxley Garden recently completed their tenders without a sale.
Yes, developers require sites in order to generate development revenue. Private home builders, on the other hand, take a significant risk. They are subject to 40% Additional Buyer's Stamp Duty (ABSD), of which 35% may be levied upfront if all properties are completed and sold within 5 years of the purchase date.
Developers are removing a common real estate agent marketing pitch by bidding less aggressively for land: that prospective home buyers should act quickly because succeeding projects will be far more expensive.
If buying sentiment shifts, sales momentum may suffer, as many consumers who buy out of fear of missing out may prefer to wait and see.
Credit: Business Times