SINGAPORE - The tenders for three state-owned plots that closed on Tuesday saw fewer developers bidding in the face of higher interest rates and heightened economic and geopolitical tensions, but two private housing sites drew top bids that were above market expectations.
The sites at Lorong 1 Toa Payoh and Pine Grove Parcel B attracted just three bids each, while a site at Clementi Avenue 1 was the most popular, with six bidders, because it is the smallest of the three plots, and therefore has the lowest land cost outlay, Mr Leonard Tay, head of research at Knight Frank Singapore, said.
Nonetheless, despite the “lower participation rate compared with some Government Land Sales (GLS) tenders of 2022, developers were willing to place bullish bids to secure top position”, he noted.
The top bid for the Clementi Avenue 1 site was submitted by a tie-up between CSC Land Group and a unit of MCL Land at $633.4 million, based on the Urban Redevelopment Authority’s provisional tender results released on Tuesday. This works out to a land rate of $1,250 per square foot per plot ratio (psf ppr).
The top bid is 4 per cent above the second highest bid at $1,202 psf ppr. But the bid gap widens to 41 per cent when compared with the sixth bid of $885 psf ppr from Hoi Hup Realty and Sunway Developments, reflecting mixed sentiment among developers, PropNex Realty head of research and content Wong Siew Ying said.
Mr Tay noted that the top bid of $1,250 psf ppr is 58.6 per cent higher than that for the nearby Clavon site, whose tender closed at $788 psf ppr in July 2019.
For the site at Lorong 1 Toa Payoh – an area that has not seen a new condo launch in seven years – a joint venture between CDL, Frasers Property and Sekisui House tabled the top bid of $968 million, which translates to a land rate of $1,360 psf ppr.
Despite the site’s superior attributes, tender participation was muted, with just three bids, given the larger total gross floor area and higher price quantum.
ERA Singapore key executive officer Eugene Lim noted that given higher interest rates and rising economic headwinds, more developers have submitted joint bids to manage development risk.
The top bid land rate is 18 per cent above the second-highest bid at $1,152 psf ppr from Tanglin Land. But the top bid of $1,360 psf ppr is 80 per cent higher than that of the site for Gem Residences, whose tender closed at $755 psf ppr ($345.86 million). Gem was the last condo launched in Toa Payoh, in 2016.
The top bid signals confidence that the future project will be supported by HDB flat upgraders and those seeking a home in the area, Ms Chia Siew Chuin, head of residential research at JLL, said.
Mr Lim noted that in the first three quarters of 2023, Toa Payoh had the highest number of million-dollar HDB flat transactions. “The median resale price of a 5-room and executive flat is $770,000 and $1.09 million respectively,” he said.
Ms Tricia Song, CBRE head of research for Singapore and South-east Asia, said the bid prices signal cautious optimism for the private residential market, while undersupplied markets like Toa Payoh could see some future upside.
“Developers continue to display low-risk appetites, preferring executive condominium (sites) that are less affected by cooling measures, and sites that are close to transport nodes, good schools and limited competing supply,” she said.
An MCL Land-linked entity submitted the top bid of $692.4 million, or a land rate of $1,223 psf ppr, for the Pine Grove (Parcel B) site. The top bid is nearly 24 per cent above the second-highest bid from UOL Group, also the developer of the 520-unit Pinetree Hill on the adjacent Pine Grove (Parcel A) site.
Due to competing supply from Parcel A, Parcel B drew fewer bids and a lower top bid compared with Parcel A, which was sold at $1,318 psf ppr, Ms Wong said.
Market expectations that the UOL Group may bid for the site and defend the pricing of its Pinetree Hill development may have discouraged other bidders from participating, Ms Chia said.
Nonetheless, the launch of Pinetree Hill and that of the future project at Parcel B will likely be paced to ensure that there is enough demand to absorb the new home supply, Mr Justin Quek, OrangeTee & Tie’s deputy chief executive, said.
Mr Nicholas Mak, chief research officer of property search portal Mogul.sg, noted that the wide spread between the top and second-highest bid for Lorong 1 Toa Payoh and Pine Grove Parcel B suggests “a wide divergence in market outlook among developers due to heightened economic and geopolitical uncertainty”.
“The Government batched the three GLS tenders to close on the same day, perhaps in the hope that this will dilute developers’ demand and moderate land prices. The number of bids for certain sites may be slightly lower, but not the top bid land rates,” he said.
Based on the land prices in Tuesday’s tender close, the prices of future mass-market condos on the three plots could be about 10 per cent to 15 per cent higher than those launched in 2023, Mr Mak said.
