You could miss the big picture if you reject the ‘too high’ bid on the Marina Gardens Crescent site.
Housing supply
Fifth, it is important that the government be 100% committed to the sale of sites listed on the GLS’s confirmed list.
The government has a key role to play in providing land for housing construction. To meet the increasing demand, it is crucial to have a sufficient private housing supply.
Construction of homes takes time. A lack of housing construction can cause private home prices to rise excessively and rental costs to escalate.
Sixth, awarding GuocoLand’s Marina Gardens Crescent site and that of its Singaporean partners from the Hong Leong Group could have boosted the development in the Marina South region and benefited Kingsford’s Marina Gardens Lane.
The Urban Redevelopment Authority rejected the one bid for 99-year leasehold Marina Gardens Crescent because it was judged to be too cheap.
The site which had been listed on the GLS Programme confirmed list for first-half 2023 is now available for purchase under the H1 GLS Programme reserve list. Developers will be able to submit an application with the price of the site that the government accepts.
Marina Gardens Crescent can be used to develop both commercial and residential properties. It is located right next to Marina South. It has a gross floor area up to 783,00 square feet. This plot can produce about 775 residential homes.
The bid from the consortium GuocoLand (F17 -0.69%), Intrepid Investments (Ptr) and TID Residential for this plot was S$770.5m or S$984/sqft/per plot ratio.
The land rates were nearly 30% lower than the S$1,402 PSF ppr Kingsford Group spent for a neighboring plot in Marina Gardens Lane during a state-run tender that closed in last June.
While the decision to reject only one bidder’s offer for the Marina Gardens Crescent Site is not new, or unprecedented, perhaps it would be worth reconsidering.
Considerations of financial nature
Accepting Marina Gardens Crescent as a bidder has a number of financial benefits.
Maximising land sale proceeds is important. Revenues from state land sale go to past reserves. The Net Returns Contribution (NIRC) is responsible for spending the return generated by the reserves.
In the future, the government could increase the land price if it does not award the Marina Gardens Crescent. It is unlikely that this will be the case.
While there are still costs to holding onto vacant land, the opportunity for a profit is missed.
In addition, when a builder starts to develop an empty land plot, jobs are created for those involved in the project.
Transparent process
The site, firstly, was made available for tendering on June 30,2023. Developers interested in the site had six months to make their calculations, develop preliminary plans, decide if they wanted to bid and, if so, what price.
A developer who was interested in participating could have made a bid for a low cost. If the bid was successful, there would be definite upside.
The fact there was only a single bid in Singapore’s transparent and competitive property development market is a good indication of the market’s appetite for this site.
Second, even though accepting the site bid may affect the values of properties nearby, including Kingsford Marina Gardens Lane site’s, we should assume that Kingsford has bought the Marina Gardens Lane website with its eye open, aware of sites nearby that may fetch a lower land rate.
Moreover a property appraiser has many data points to consider and may attach less weight if Marina Gardens Crescent is considered an anomaly.
Third, there is no way to consider the price of a single bid for Marina Gardens Crescent as absurd.
The highest bidders for Marina Gardens Lane submitted bids, which worked out at S$985 per square foot per year (psf/ppr) and S$953 each. Kingsford’s aggressive top bid was therefore the anomaly.
The market conditions could also change in the almost seven months that separate the tendering of the Marina Gardens Crescent site from the Marina Gardens Lane.
Homebuyers who know how to shop for a good deal could appreciate the homes at Marina Gardens Crescent. This could lead to a surge in demand for houses in the region, which may have positive spillover effects on Kingsford’s Marina Gardens Lane. Kingsford may be able price its home more aggressively if the market accepts homes in Marina South.
The sole bidder on the Marina Gardens Crescent property may be denied the opportunity to participate in future state land sales.
The high costs of construction, interest rates and the uncertain economic climate make developers cautious about bidding.
URA risked discouraging developers to participate in future land tenders if it rejected what were deemed low bids. A developer interested in the site may not bid for fear of wasting time by submitting an unacceptable bid.
GuocoLand has missed a great opportunity with the rejection of its sole bid on the Marina Gardens Crescent. In addition, the rejection of the only bid for the Marina South site may have been a missed possibility to accelerate the development and increase the number of private residences in that area.
