SINGAPORE (Feb 28): DBS Group Research believes property developers are bullish on land-banking in executive condominium (EC) sites in Singapore due to limited supply in the near term.

This comes after a joint venture between City Developments (CDL) and TID Residential came up tops in the latest government land tender with a $590.4 million bid for the 820-unit EC site at Sumang Walk in Punggol.

The only EC plot available in the Government Land Sales (GLS) programme in 2H17, the Sumang Walk site saw a whopping 17 bids at the close on Tuesday night.

“This site will be somewhat of a ‘limelight’ given that it will be the only EC that will be launched in 2019,” says lead analyst Derek Tan in a flash note on Wednesday.

According to Tan, CDL’s winning bid translates to a record $583 per square foot per plot ratio (psf ppr). However, he notes that its bid was only 5% higher than the second highest bidder.

“Based on our estimates, the breakeven for the project is estimated to be close to $1,000 psf,” Tan says. Assuming a 10-15% margin, this implies a highest-ever launch price of around $1,100 to $1,150 psf for an EC in the Punggol area, he adds.

Tan notes that the average sales quantum per unit will be close to $1.15 million, based on an average unit size of 1,000 psf.

“While it appears to be a harrowing experience for young couples to pay for a ‘million dollar property’, the sales quantum per unit is within the 30% Mortgage Service Ratio (MSR) limit for a household earning at least $11,000 - $14,000 per month,” he says.

According to Tan, strong sales in recent EC sites have bolstered developers’ confidence.

“Robust sales momentum at Hundred Palms (which was sold out within a weekend) and the anticipated strong demand to the upcoming launch of Rivercove Residences in March 2018 has boosted developers’ confidence that ECs will continue to attract a strong buyer pool,” Tan says.

As at 4.35pm, shares of CityDev are trading flat at $12.73.