By THE EDGE
Venturing into the Singapore property development market is the obvious progression for Selangor Dredging Bhd (SDB) as far as Teh Lip Kim is concerned. Teh is managing director of the company once helmed by her father.
“We wanted to expand regionally, and for us, Singapore is the safest bet. The rules there are transparent, approval processes are clear-cut and prompt, and it takes between four and six months to get everything done — from development order to approval for the building plan. It was an easy choice,” she tells City & Country.
While other local developers have looked past Singapore for opportunities in India, China, Vietnam, Cambodia and the Middle East, Teh is convinced about SDB’s prospects in Singapore. This is on top of the synergistic advantages to be found since some of its current consultants — those involved in the architectural, landscape as well as civil and structural works — are based in Singapore.
SDB’s maiden project in Singapore — a planned 8-storey block comprising 23 apartments — is scheduled for launch later this year. While the values have yet to be finalised, Teh is not the least bit worried about sales. “I’m not concerned. We only have 23 units to sell. We already have a lot of people calling us [about the units]. I am not saying we are sold out; we haven’t launched, but I am every bit confident.”
As for pricing, she says SDB is waiting for the big boys nearby to launch their projects. “We want to see at what price CapitaLand and Guocoland are going to sell their units in the next couple of months. In Singapore these days, pricing always sets a new benchmark,” she says. The developer expects to start work in mid-2008.
SDB’s venture in Singapore involves the redevelopment of Mount Emily Tower on Wilkie Road, which is adjacent to Orchard Road. This is currently the trend in landlocked Singapore.
The whole process, termed a collective sale, involves securing 80% ownership of the units through real estate agents. The interested developer can then make a bid for the project through the tender process. The rate payable to the vendor is based on the approved plot ratio, says group general manager Loong Ching Hong. In this case, it is based on S$600 (about RM1,401) psf per plot ratio. SDB paid S$22 million for the 17,111.38 sq ft lot.
“We are able to calculate our costs and profits based on the open and transparent redevelopment system that Singapore employs, where for each zone, there is the approved plot ratio and there are regulations on how high you can build, for instance. With this, we can estimate our costing,” says Loong, adding that there is a height limit for SDB’s site as it is located close to the istana. Thus, the developer cannot build beyond seven or eight storeys.
“We don’t have to build basements because only one parking bay is allocated to a unit. The site is sloping downwards, so we can just put in a sub-basement there above the ground,” he says.
Vendors stand to become “instant millionaires” in cases where plot ratios for certain zones are increased, Loong says. “If the owner were to sell his unit on the secondary market, it would probably earn him less than if he sold in a collective sale for redevelopment purposes, and he stands to gain much more if the plot ratio is increased, say, from one to three,” he explains.
According to a Singapore-based property consultant, real estate agents are not the only people looking for collective sale sites for redevelopment purposes. Unit owners too have been known to come together for this purpose because they realise there is a premium in appearing as a group to sell their units, as opposed to selling individually. The consultant adds that it is not only older buildings that are the target of collective sale redevelopment, but also newer buildings.
“Those that are more than 10 years old are typically considered older buildings. For the so-called ‘newer’ ones, there needs to be consensus among at least 90% of the unit owners before they can proceed to consider the building for redevelopment purposes,” she says.
Under collective sale terms, the developer is bound by law to allow the sellers/previous owners to stay on for six months after getting their monies while they look for alternative housing.
With the SDB team raring to go in Singapore, there are plans for more such projects. Teh shares that they may even buy land outright. “We hope to have a second project in six months’ time,” she says.
Collective sale seems to be the way to go in Singapore. According to a DTZ Research report on the Singapore market for 4Q2006, total investment transactions rose to S$24.5 billion in 2006, almost double that of the previous year. This was driven by the record sale of 80 collective sale sites.
“Compared with 2005, sales of private development sites saw a significant increase of 224%; this was largely attributed to collective sales, which increased almost fourfold to S$7.9 billion and accounted for 32% of total sales,” the report said.
The residential sector, the report added, was the star performer in 2006, backed by strong sentiment in the high end of the market. In 4Q2006, the sector accounted for almost S$2.2 billion, 81% of which was from collective sale deals. Similar to recent quarters, most of the 13 freehold collective sale sites were bought by boutique developers or foreign funds that had tied up with small local developers. A new benchmark in pricing was set by Wing Tai Holdings when it purchased Ardmore Point at S$1,369 psf per plot ratio (including development charge), surpassing the S$1,358 psf per plot ratio (including development charge) record set in 3Q2006 for the adjacent Pin Tjoe Court.
On the current rates of latest condominium offerings in Singapore, the consultant says it is very “site specific”. “A top-end location would be the Orchard Turn area, where rates have surpassed the S$4,000 psf mark,” she adds.
Different take on development
Teh says SDB has no qualms about pricing its products above competition because land is scarce.
She adds that it is quite common for its properties to be priced 20% higher than those in the vicinity. For semidees, she says developers shrink the size to tag them at RM500,000. “But in Aman Sari [Puchong], for instance, we sold 2½-storey semidees designed for third-generation living at RM750,000. We are ready to accept that sales will be comparatively slower, but buyers will come when they start to understand our commitment and passion for the development business, and especially when the project starts taking shape physically,” she says. SDB also offers a 36-month liability period for defects and the price premium takes this into account.
In the KL city centre, while most other developers were satisfied with their stratified products offering a 180º view, Teh insisted on going for a 270º view for SDB’s Park Seven condo development. The building has been reinforced structurally to withstand earth tremors, says Loong. “We employ the flat slab method of construction, where the units are column-free. The best gauge of acceptance of our offerings is that some big-time developers have purchased units from us,” he adds.
SDB has lined up some interesting projects, starting with 20trees — a 203-unit development on a 23-acre site in Taman Melawati made up of courtyard homes and apartments with prices tagged from RM580,000. Teh says she is looking at foreign investors and the expatriate market. “We are capitalising on the view of the quartz hill. In line with our focus to offer lifestyle living, we are offering 20 pocket gardens, with each featuring a different experience. We are not talking about a patch of grass with some play area; this is truly something unique in Malaysia.”
The whole idea is to calm the senses of the residents, she says. “When people say they have spent millions on landscaping, well they have not gone to the depth that we have in planning 20trees; we are planning to come up with a mini-book to detail everything we are offering so that people can understand it better.”
As for the homes, Teh says the design offers the space of a semidee. “Usually, semidees have 10ft of extra land on the side but to utilise this, you would have to walk out of your home. Here, what we have done is to feature the 10ft of land within the home itself. The smaller courtyard homes will be priced from RM1.4 million while the bigger ones [that come with a swimming pool] will cost RM2.4 million onwards.”
Another project waiting to take off is its 21-bungalow development in Damansara Heights, with a launch scheduled for early next year. The design features 4 to 5-storey homes with a built-up of about 10,000 sq ft, and the price is about RM1,000 psf.
Currently under construction is Ameera in SS2 Petaling Jaya, which is made up of low-rise villas and condominium units in a 30-storey block. About 50% of the 290 units has been snapped up to date.