Land cost, gross REdevelopment value and future

Occasionally, we hear of projects with a gross development value (GDV) of RM1 billion. For an affordable unit of RM250,000 each this meant that there are a total of 4,000 units for this development. Yeah, super duper high-density even if overall is still dependent on the land size. Smaller number of units and a very small land size DOES NOT mean it’s low density in my opinion. Well, if the development is for RM500,000 units, the total units would still come up to 2,000. 🙂  Usually, the land price for a development is between 10 percent of the GDV even if occasionally it will go higher. For a RM1 billion GDV, the land cost can be anywhere from RM100 million or higher. So, what happens when the land cost is 50 percent of the GDV? Haha. The developer will increase the selling price so that the land cost as a percentage is lowered. Else, they will not buy the land in the first place. In a bullish market, the land prices can go up very fast because of the expectations of a higher house price. Let’s look at the starting cost of a redevelopment project in Singapore shall we?

Reported in many medias was the news of an acquisition of a Singapore based residential estate. The investment cost? RM1.59 million (S$530 million)  Here’s the news in TheStar.  Another coverage in TheEdge Markets here.  Sunway Developments Pte Ltd will be jointly acquiring a private residential property called Brookvale Park in Singapore with Hoi Hup Realty Pte Ltd.  The current Brookvale Park land will be redeveloped into a new private residential development. Sunway said that the Brookvale Park is located on 999-year leasehold land in Clementi. It is currently a 160-unit private residential estate with a land area of 34,654 sq m.  Sunway Developments is a wholly owned subsidiary of Sunway Holdings Sdn Bhd, which is, in turn, a wholly owned subsidiary of Sunway Bhd.  The Singaporean partner, Hoi Hup is a company incorporated in Singapore and its core business is related to real estate development. Image shows Brookvale Park units for rental. there were no unit under the ‘For Sale’ category already because this en-bloc sale of the whole development is already a reality. In Singapore, enbloc sale could happen to a development over 10 years when at least 80 percent of the residents agree to sell. The remaining 20 percent would just have to abide by the majority decision.
I like en-bloc developments. I personally think this is a great way forward for redevelopments, especially for projects which are already old and yet situated within a mature hotspot. Especially important when we look at rejuvenating city centres which are usually busy during the day but becomes quiet in the evening when everyone leaves the city for their homes in the suburbs. It’s also very important to ensure affordability, especially based on the trend of working professionals who are marrying later and thus do not need a huge unit to begin with. Many of these working professionals do not originate from within Greater Kuala Lumpur and may thus prefer a lower starting base instead of buying something far away from their working place. Without years of working and savings, the current crop of existing condos would be out of their (new graduates) reach too, price wise.  Happy hoping.
written on 17 Feb 2018
Next suggested article: Greater London, severely unaffordable. Start thinking Greater KL