$4000 at Eng Lok - What's Our Reserve Price?

LianHeZaoBao on 12 June (Singapore News p5) reported on the Eng Lok Mansion redevelopment. They said the developers plan to build high end luxury boutique apartments. The article disclosed that each unit will be at least 2000 sq ft, of $4000 psf. Target buyers are overseas tycoons. Specifically, it would consist of 26 3-bed units (2000 sq ft), 14 4-bed units (2800 sq ft) and 6 penthouse units (6000 sq ft), along with an Olympic-sized pool.

$4000 psf.

If that's the case, and given that Eng Lok was one of the highest en-bloc sale of its time, what should our Reserve Price at BGV be?

(Updated with more information from the article)

Tags: botanic gardens view, botanic garden view, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, real estate, singapore

The Question of Reserve Price

It all boils down to this - the Reserve Price. What is the value of our home, and by this, we don't just mean the individual unit prices, but the land value. Taking advice from Dr Minority, I looked through the URA caveats lodged website (from his blog) and found that in the past year, only 2 units in BGV were sold.

The interesting thing was the price difference:-
Mar 2007 - $848psf
Apr 2007 - $1252psf

This represents a 47% increase in a month alone. Now some may say this is because the buyer in Apr 2007 was anticipating enbloc potential, so paid a premium for it (ie artificially inflated). So I looked at the various properties within 500m from BGV, a fair enough assumption given that land value will be pegged approximately to the prevailing market rates for units around the area. So that includes, Botanic Gardens Mansion, Grange Residences, Nassim Jade, Nassim Mansion, Nassim Park, St Martin Residences, Tanglin Residences, The Loft. The URA site gives prices for units sold from June 2006 to May 2007. Here are some numbers :-

• The average psf for the proximity is $1649 (across the year, across all units)
• Average for BG Mansion is $850 or $200 less than the average for BGV.
• Most expensive estate is Grange Residences = Average of $1979psf
  
• The average psf in the proximity has been increasing steadily from June 06 to May 07, about $70 per mth, from $1161 in 06/06 to $1998 in 05/07.
  
• Eng Lok Mansion, the closest enbloc, was sold at $1218 psf ppr (Mar 2006). Next nearest are Leedon Heights ($1062 psf ppr), Beverly Mai ($1184 psf ppr). If you look further towards Grange Road, you'll get reserve prices at about $1700 psf (Grange Heights).
  

This is not counting the unique site of BGV being close to Botanic Gardens, which will attract a significant premium for any developer hoping to sell units redeveloped in BGV. And since we're talking about land value here, and not estate or unit value, the average pricing for these other nearby developments have to be taken into account, including new estates like Grange Residences.

What does all these mean?

• To buy a replacement new unit in the same area would cost at least $1979psf (based on Grange Residences (GR) average) or ranging from $2091-$2237 psf from Apr 07 prices of GR alone. Given that GR is a few years old now, any developer can easily build and sell new units in BGV for more than $2300 psf. In other words, if we wish to stay in the same place again, near BGV, we're looking at about at least $2000-$2300 psf to buy a new condo unit.
  
• In Nov 2006, Napier Properties said it plans to redevelop Eng Lok Mansion into a 10 storey, 46 unit high end condo, priced "at the top end of the Singapore luxury residential market and possibly a new benchmark". The price cited in Nov 2006 was high $2000 but given the bullish market, one can easily expect it to go up to $3000-$3500. That'll be our new luxury neighbour. We can expect that any developer that buys our estate will be using "Napier 8" (as it will be called) as a benchmark and will almost certainly develop high end luxury condos in BGV. Considering that nowadays developers are touting $4000 psf as the high end pricing for luxury condos, this is not unrealistic.
• Will we be able to get an exchange unit in the new development? Not very likely, given the price difference between a new high end condo of about $3000-$3500 and the average of about $2300psf for the area. I think a major top up will be required, unless the developer decides not to build luxury condos (highly unlikely). It means we'll be hard pressed to get a similar unit in the same area, unless you move further westwards (towards Farrer/Holland) or towards River Valley or Bukit Timah.
• So what should the reserve price be? If we work backwards from the figure of $3000-$3500 as a target price for developers to sell new units, and considering that developers typically factor in about 40-50% for costs and profit, a conservative reserve price would be about $2000-$2500 psf.
  

Are you happy with this RP? Almost certainly you won't be able to buy anything in the new BGV or Napier 8. You might be able to get something in Grange Residences with some topping up, but I've heard complaints about the structural quality of GR (you can hear neighbours from the thin walls).

Agents say you may not be able to afford new properties but there are plenty of slightly older properties nearby that are within reach. True, but how many years before those go enbloc?

I urge you to think carefully, before the agents do the song and dance and try to persuade you to sign the CSA...!

(Thanks to Dr Minority for helping with the numbers)

Tags: Botanic Gardens View, Eng Lok Mansion, Napier 8, Taman Serasi, collective sale, collective sales, condo, en bloc, en-bloc, en-bloc sale, enbloc, enbloc sale, property, singapore, real estate