The month has been full of surprises, none more so than the developer land sale at Anchorvale Lane in Sengkang. It was expected to draw limited interest, given the depressed market and huge supply of ECs. Instead, it drew 16 bids, with a top bid of $241 million. What craziness is this?
The Anchorvale Land Plot
In June this year, Anchorvale Lane – a 226,199 square foot plot in Sengkang- was put up for sale. The plot is for Executive Condominium (EC) development, and is large enough for around 635 units. The site overlooks the banks of the Sungei-Punggol river, and is close to Anchor Green Primary School. Transport wise, it’s close to Tongkang LRT station, and about 30 minutes to the city centre.
The plot was expected to draw only modest attention from developers. Bellewaters, The Vales, and Treasure Crest are all ECs located nearby. There are 296 unsold units between these ECs, which suggests an uncomfortably high level of supply.
There were also around 5,471 unsold EC units in Singapore at the end of June. Such conditions make developers wary of buying more land, as it could be a challenge for them to close sales at sufficient prices.
The Anchorvale Lane plot is quite sizeable, and 635 units is a lot to sell.
Still, there was high demand for the land plot
16 bids were made for the plot, with Hoi Hup Realty and Sunway Developments jointly topping the list. The winning bid was around $241 million, which works out to over $355 per square foot. In an interview with TODAY, Mr. Nicholas Mak, Head of Research and Consultancy at SLP International Property Consultants, estimated that their development would have to sell at around $820 per square foot.
An ambitious figure, given that the nearby Bellewaters has sold at an average of $720.40 per square foot. The Vale, also located nearby, averages around $802 per square foot. Clearly, the property developers who submitted their bid know something the rest of us don’t.
What about Sengkang could possibly interest the developers so much?
We can make some calculated guesses:
- This is the last EC plot available for the year
- Expectations of market recovery in 2017 – 2018
- The Punggol Creative Cluster
- Treasure Crest EC sales
- This is the only EC plot available for the year
The high level of interest is partly due to this being the only EC plot in 2016.
There is a lot of confidence in ECs despite the current market slump. This is due to the simple fact that ECs are private condos (after the 10th year), that can be bought with government subsidies; they will almost always be a great deal. The Anchorvale Lane plot represents a limited opportunity to build this desired property type.
- Expectations of market recovery in 2017-2018
Developers may be expecting the market to recover by the time this Anchorvale EC is launched. This is likely to be 15 to 18 months from now. Even if cooling measures are still in place, we are seeing signs that home prices are reaching the absolute bottom – if they’re not there yet, they probably will be by late 2017 or mid-2018.
That’s just in time for this new condo to be launched.
Also, the number of unsold ECs has been on a steady decline. As we mentioned above, there were 5,471 unsold units at the end of June – but this is down from 6,520 units in Q1 this year.
- The Punggol Creative Cluster and Learning Corridor
The URA Master Plan is consulted by both investors and developers, with regard to a development’s prospects. Most of the time, property values will pivot based on how URA intends to develop the given area.
In this case, we note that there is intention to develop a Punggol Creative Cluster and Learning Corridor. This will provide space for research institutes and perhaps start-ups, which suggests the potential for offices and educational facilities. In addition, there are plans to build a “Market Village” along the Waterfront, with retail and leisure activities.
The dates are not confirmed, but this could attract buyers with more long term plans.
- Treasure Crest EC Sales
Treasure Crest, in Anchorvale Crescent, is one of the best-selling ECs in Singapore. In July this year, the development sold 72 percent of its units over a single weekend launch. This could have emboldened developers regarding the location and prospects.
We note, however, Treasure Crest sold for around $742 per square foot, and is close to the Sengkang MRT station.
Developers have been aggressive despite the property slump
Perhaps what developers have is, well, a corporate level of calm and foresight. While most of us think the market is bad, developers have weathered far worse storms, such as the 2008/9 Global Financial Crisis, from which they easily rebounded by early 2011.
Perhaps this is why the government hasn’t budged on its cooling measures – developers are still aggressive and confident, despite the hoo-ha about how bad the market is faring.