Property

Property: A state tender for a Punggol EC site attracted just 3 bids with the top bid below earlier expectations. Top bid of $270.08/psf from jv between Frasers Centrepoint and Keong Hong Contruction was lower than the $300-350/psf most property consultants expected for the site when it was launched in late May, and was also 12% below the $308/psf sold for a comparable EC site in Jun10 which is now being sold at a median price of $700/psf…..

The top bid suggest a breakeven cost of $570-600/psf for a new project. Latest result shows the cautious bidding at this tender, with several ECs under active marketing and some more to be launched…..

Deutsche believes that uncertainty over the extent of demand dilution from a potential increase in HDB income ceiling and rising supply in the micromarket could have contributed to the measured bids. The ongoing moderation in land prices, if sustained, should be positive for developers' margin in a stable pricing environment and result in higher NAV accretion. Like KepLand and CapitaLand with valuations attractive at deep discounts to NAV.