SINGAPORE (May 26): The thirst for land is now spreading into the en-bloc market, says DBS Vickers, with a consortium Oxley-Lian Beng Venture putting in the S$575 million (RM1.77 billion) winning bid for Rio Casa.

Rio Casa is a privatised HUDC estate with a site area of 36,811.1 sqm with a potential built-up plot ratio of 2.8x. The winning bid was way above the S$450 million that the owners were reportedly asking for.

Based on estimates, each of the 286 Rio Casa owners will receive close to S$2 million if the en-bloc deal goes through.

The estate is located in an established residential estate and is approximately 800m from Hougang MRT station.

“We note that the estate sites along Hougang Avenue 7, offering a riverview along the estate (Sungei Serangoon), which could be a key reason for the robust bid by the developer,” says analyst Mervin Song in a Friday report.

The developer will have to pay a differential premium of S$208 million to top up the lease and the development of the site to a gross plot ratio of 2.8x. This translates to an all-in land price of close to S$706 psf.

“We estimate the breakeven for the land to be close to S$1,100psf,” says Song.

As surrounding condominiums were trading in the range of S$700-1,030psf as of 1Q17, the developer could be expecting home prices to rebound when the project is launched, sometime in late 2018.

Most interestingly, would buyers of the new development to enjoy a second round of enbloc, asks Song.

That’s because the site is located close to Paya Labar Airbase, which will be relocated to Changi from 2030 and beyond, making way for the potential redevelopment of the site at Paya Labar.

When that happens, there will be further land intensification from the current 2.8x.

Shares of Oxley, Lian Beng and KSH are trading at 54 Singapore cents, 60 Singapore cents, 87 Singapore cents respectively. —

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