Tuesday, March 07, 2006
Collective sales demand seen to remain strong amid higher land costs
They say they see no lack of developers placing strong bids for collective or en-bloc sale sites in prime locations.
And that is despite rising land prices and the recent hikes in development charges.
Market watchers say collective sale site-owners can expect prices that are some 20% higher than last year's.
There has been an increasing number of prime collective sale sites in the market in recent months, and analysts say they expect the momentum to continue.
Just last week, Eng Lok Mansion along Napier Road was sold for a record $1,218 per square foot per plot ratio.
That was just one month after another Orchard area property - Angullia Mansion - was sold for $1,058 per square foot per plot ratio.
These unit prices have edged pass the $1,093 record high set by Scott Towers in 1997.
Analysts say such rising land prices are leading potential en-bloc site owners to expect 20% higher premiums compared to last year.
"As a result of the improvements over the last six months in particular, we've found that expectations have risen in response to the good news, which has also translated to higher land prices. And the higher land prices are now yielding owners perhaps a premium of 50% or so. This, I expect, can continue for the next six months or so," said Jeremy Lake, Investment Properties Executive Director at CB Richard Ellis.
Industry watchers say they do not expect the recent hike in development charges to hurt developers' appetite.
And that is because land prices, especially in prime areas, are rising at an even faster pace.
And in a sellers' market, some say the higher costs will likely be passed on to property buyers.
"Some of the latest increase in development charges was the biggest in six years. In a rising market, as we've witnessed today, there's a good chance that this cost will be passed on to the eventual buyer of the end units of the new projects," said Lui Seng Fatt, regional director of Head of Investments at Jones Lang LaSalle.
It is estimated that every 10% hike in development charge will translate into a 6% increase in costs incurred by developers.
- CNA /ls
// posted by Shajahan @ 3:40 PM 