The Dunman Road government land sale (GLS) is a plot of land that many people are eyeing.
The level of interest in this project is very high.
I have received quite a few enquiries from various readers of Second Property Investors who are very keen and waiting for how much the prices of this development will be.
The tender is expected to close on 2nd June 2022.
To be honest, what the prices will be is still uncertain so it is hard to do planning around that.
But if you are one of those who are waiting for this place to be launched, perhaps this article would be an interesting read for you.
Perhaps by understanding the pricing considerations of developers – we can get some ideas on how this Dunman Road land will perform.
What are the Considerations of Private Property Developers?
This is something I noticed that happens on the land bids over the years in the market.
Do take note – this is simply an educated guess.
I have no access to their boardroom meetings nor do I remotely know anyone who decides on their pricing considerations.
So my observations are grounded on the market response.
In 2018, CDL launched Tapestry in Tampines for sale.
(Tapestry has just obtained their TOP status not long ago.)
But before the launch of Tapestry, the same developer for Tapestry (CDL) bought a plot of land in West Coast at a seemingly high price.
This creates a perception when we do a comparison.
Suddenly, the Tampines development seems cheaper when compared to the West Coast.
And the developer did achieve a good response from the selling of Tapestry.
The breakeven price for this development now known as Whistler Grand is $1314 psf ppr.
Calculation by EdgeProp
Below is the land bids for West Coast Vale.
The top bidder is CDL.
Source: https://www.ura.gov.sg/-/media/Corporate/Media-Room/2018/Jan/pr18-05c.pdf
The next highest bidder is CSC Land.
CSC Land is also the developer of Twin Vew – which is another condo development that is going to launch beside this plot of land in West Coast.
Why do they need to do that?
Because if the West Coast Vale plot of land was sold at much lower price, it will affect the selling price of Twin Vew – which was going to be launched soon.
But Twin Vew was only going to be launched AFTER this plot of land at West Coast Vale was sold.
So the developer have to defend their price from the start.
It will also make their existing holdings look very attractive.
Right after this West Coast Vale land was sold to CDL at $800 PSF PPR, they had a successful launch of Tapestry.
Twin Vew also had a very solid response – 85% sold at prices as high as $1700 PSF on the launch day.
As for Whistler Grand?
All the developer did was to start selling the first few units at the breakeven price.
Eventually the rest of the units – they slowly marked up the price higher and higher – floor by floor.
And end of the day, Whistler Grand is still fully sold.
My observation is that West Coast Vale land plot is the price anchor that allowed the other developments to be priced higher.
Now was this just a one time off or a regular pricing consideration that is being applied?
Here is another example.
Who was the 2nd highest bidder for Jiak Kim Street plot of land – formerly known as Zouk?
I am sure you have heard of ZOUK. A place where many people spend their Wednesday nights there for mambo.
This land at Jiak Kim Street was bought over by Frasers Centrepoint Limited (FCL).
The development is now known as Riviere.
What caught my attention is not the winning bidder FCL.
Source: https://www.ura.gov.sg/-/media/User%20Defined/URA%20Online/media-room/2017/Dec/pr17-82a.pdf
But the 2nd highest bidder.
This 2nd highest bidder is also a developer that has regular partnerships with the developer of Martin Modern – an existing launch not too far away from Jiak Kim Street.
They have come together to work on a few developments like:
- Pacific Mansion enbloc. They came together to build the current The Avenir.
- Lentor Hills Road GLS. They came together to bid for this Lentor land parcel.
- Midtown Modern
During December 2017 – Martin Modern was only less than 50% sold.
Martin Modern was launched for sale in July 2017.
So my theory is this:
The developer of Martin Modern has no choice but to defend their prices.
How?
They bought the enbloc site of Pacific Mansion. (currently called The Avenir)
And coincidentally their regular working partner and developer tried to bid for the Jiak Kim Street plot of land at a high price.
Again, this is just a theory.
(First Bedok Land Pte Ltd is an indirect wholly-owned subsidiary of Guocoland.)
Source: https://www.ura.gov.sg/-/media/User%20Defined/URA%20Online/media-room/2016/jun/pr16-40a.pdf?la=en
Of course, we can see Intrepid Investment Pte Ltd has always wanted to get a plot of land at this location too.
They are the 2nd highest bidder for the land parcel where Martin Modern is.
So it might be a pure coincidence.
But it definitely helps the developer for Martin Modern.
What if there was no FCL to buy the land at high price?
It won’t be too low also.
As Intrepid Investments has already put in a relatively high bid to make sure it is protected.
From the pricing chart below, you can see that Jiak Kim Street now has a high breakeven price of $2431 psf (EdgeProp estimation).
You can see Martin Modern price went up fast after that.
And the take up rate increased as well.
Are all these mere coincidences?
This consideration of bidding for a plot of land nearby to defend or secure your own selling price?
Perhaps. Again, I am just making educated guesses.
I really have no idea if these are just coincidences or is there a calculated consideration behind this.
So don’t quote me.
But if I put myself in the shoes of the developer – would I do this?
Definitely.
Because it just works so well time after time.
Maybe the worst case scenario is I will have one development that is selling at a slight loss or breakeven price.
Either way, the pricing will attract buyers to take action again.
Don’t you think so?
Dunman Road GLS vs Jalan Tembusu GLS
CDL recently just bought Jalan Tembusu in Jan 2022.
Their breakeven price is estimated to be $2059 psf based on EdgeProp estimate.
This tender actually makes Amber Park (another condo development by CDL and also the same developer for Jalan Tembusu land bid) looks cheaper due to its freehold land status.
Amber Park is currently selling from $23xx psf now.
If I am CDL, I would buy this plot of land at a high price too.
Imagine if another developer got this land instead and planning to launch at $1800 psf.
Who will buy Amber Park now right?
That why we can see CDL put up a slightly higher price compared to the next few bidders.
See the gap in prices between the top bidder and the second highest bidder.
It is $100 psf higher.
So if CDL didn’t bid this land, the breakeven price might be $100psf cheaper at $19xx psf instead of $2059 psf.
Imagine if you are CDL.
Will you put up some form of defence on this Dunman Road land plot to make sure you are able to sell the Jalan Tembusu land plot in future too?
Or will you give it a chance to sell at $1800 psf – when your own Jalan Tembusu needs to sell at $2059 psf just to breakeven?
Again, this is just an educated guess.
I cannot speak on behalf of the big players.
But I were in their position and I have the funds and budget to do so?
I will definitely do it.
All they need to get some partners come together to do it. Why?
Because the Dunman Road land is bigger plot and the cost will be a lot higher.
If I am Guocoland I will bid for this land too.
Once this land hits a certain price cap, it will make Midtown Modern and Midtown Bay look more attractive as well.
Ang Mo Kio Ave 1 GLS vs Lentor Central GLS
Here is an upcoming GLS that looks interesting.
URA is expected to launch further land plots for sale in Lentor in May 2022.
You can see the difference in prices of Lentor Central vs Lentor Hills Parcel A.
Lentor Central was awarded in July 2021 – before the December 2021 cooling measures.
Following the cooling measures, you can see the difference in price for the Lentor Hills Parcel A – it is now $1060 PSF PPR.
Lentor Central is now more expensive than the AMK Ave 1 GLS.
(The AMK Ave 1 plot is now known as AMO Residences by UOL.)
Recently someone asked me:
Can I buy a small 3-room unit that is next to the MRT with a mall coming up in the far north west of Singapore?
My reply to him was this:
Most people who move to north west of Singapore are usually families and they need the parents’ support back there.
When we do a comparison of a small 3-room unit that comes with MRT and malls versus a bigger unit – I think most consumers will prefer the bigger unit.
They don’t mind slightly more inconvenience.
They don’t mind taking bus to MRT.
But their priority is a bigger space.
So end of the day, that bigger unit will perform better than the small 3 room that comes with MRT and Mall.
You will understand what I mean when you have more than 1 kid at home now.
Understand Why Land Prices Will Tend To Get Higher and Higher
So what should we do after knowing all this?
I think at the end of the day, we can never beat the developers.
They have more funds, more market share and some measure of control in the market.
All we can do is just follow through their pricing strategies.
Most importantly, if we were to purchase a unit from developers…
We should buy something where future buyers are very willing to buy it from us in the future.
Why is it so?
We can see that the Singapore government is encouraging people to view their property as a home for stay.
Rather than just a pure property investment.
We see this easily from the cooling measures that has been around for more than 10 years.
There is another way to view the current situation.
When you try to buy something from a popular and branded developer, it can help you as well.
You can see they don’t only sell you the unit.
But many times, they are also trying to defend their holdings and also eventually help you to push up the value of your own properties.
The same theory is still applicable. Buy a property which future buyers will love to buy from you.
But first, you must simulate your future buyers’ behavior and needs – so you can get the best possible choice unit.
Yes, the developers are playing a particular type of game.
But we need not be unhappy about it.
Conclusion
We can also be part of the game.
But we need to plan first. Once we are inside the game – we have to think fast and act fast.
From 1 unit to 2 unit. From a 3-room to a 4-room.
So anyone who is going to buy from you in the future for stay – they must feel good about the unit.
The moment they see the next door launch is higher than their purchase price – they will feel is a good deal.
Plan how you want to exit from this game.
How?
By making sure you know how to get the right kind of unit for the people who wants to buy and stay there.
This is the most tricky part.
Have questions? It is difficult for me to cover more in greater detail.
But if you are really keen to explore your own options if you plan to play this game – feel free to drop me a message via whatsapp.
All our discussions are no-obligation.
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