Pine Grove's DC may deter property developers: analysts

Pine Grove's DC may deter property developers: analysts
By Jo-ann Huang | Posted: 10 March 2011 2351 hrs

SINGAPORE : Experts have said Pine Grove's high development charge (DC) of S$460 million may be a deal breaker for property developers.

They add that the site's DC has increased by 9.5 per cent, in line with the DC rate hike earlier this month.

Including the DC, analysts said Pine Grove's total cost for a buyer works out to S$2.16 billion or S$1,152 per square foot per plot ratio.

A lush green view is what Pine Grove resident Lisa Chong is giving up if the site - worth an estimated S$1.7 billion - is sold.

Upon the sale, Ms Chong and her family will be receiving more than S$2 million.

Pine Grove home owners will receive between S$2.1 million and S$2.75 million for each of the units, which range in size from 1,163 square feet to 1,938 square feet.

Ms Chong said: "Probably part of it will go towards our new place, wherever that is going to be, and we would probably try to invest the rest."

Analysts said Pine Grove's hefty price tag will squeeze out small and single property developers.

Christina Sim, director of investment at Cushman & Wakefield, said: "For such a huge project, you will be looking at a consortium of developers because it is far too big a risk for a single developer to undertake. We will probably be looking at the big developers who might team up to buy this plot."

With the market looking robust, experts said property developers are now stocking up on their land banks.

And private property owners are cashing in on the trend.

Currently, there have been at least eight collective sale tenders and two done deals so far this year.

Meanwhile, Ms Chong is positive that Pine Grove's third enbloc attempt will be a success.

She said: "At the end of the day, it is still a prime location. We are on the major bus routes, we are relatively close to the CBD by expressway and we are also close to town, we are not in an overly noisy neighbourhood so...we hope for the best."

But analysts said DC rates have increased significantly in the last four years, which have thinned profit margins for some enbloc property residents.

Ms Sim said: "We were looking at as high of a profit margin of 50 to 100 per cent, but now if you get a margin of 15 to 30 per cent, I think you are considered quite lucky."

Analysts said the DC rate increase is the government's way of keeping the enbloc property market in check.

- CNA/ms

- wong chee tat :)