CDL and Mitsui have won Singapore’s first long-term rental project on this Zion Road site (Image: Google)
Singapore’s Urban Redevelopment Authority made a pair of announcements on Tuesday set to further expand home supply in the city-state, despite its own figures showing sales of private housing falling 6 percent in the first quarter, compared to the same period last year.
The URA surprised market analysts by awarding a combined rental residential and condo project on Zion Road in District 10 to a City Developments Ltd and MItsui Fudosan joint venture after the duo had placed a below-expectations S$1.1 billion ($820 million) offer as the sole bidder for the luxury site.
The agency also awarded a condo site along Upper Thomson Road in Singapore’s northern region to a joint venture between Malaysia’s GuocoLand and Hong Leong Holdings, the private holding company of CDL chairman Kwek Leng Beng. While the JV’s S$779.6 million offer had been the sole bid for that plot, some industry experts had speculated that the URA might withdraw the tender after the price came in below expectations.
With those two projects set to add up to 1,970 homes to the market, the URA also announced on Tuesday that it is launching tenders for a pair of sites on Canberra Crescent in the Sembawang Square Estate land residential zone and on De Souza Avenue in Upper Bukit Timah, with those two projects combined potentially yielding another 730 new private homes.
Rental Residential Site Sells Cheap
For the Zion Road site, CDL and Mitsui Fudosan are acquiring the site for S$1,202 ($881) per square foot of built area, or around 30 percent less than a neighbouring plot drew in the most recent land sale in the area in 2017. CBRE calls the URA’s award of the site a sign of Singapore’s slowing housing market.
Sherman Kwek, chief executive of City Developments Ltd
“The acceptance of the lower-than-expected bid price despite its being the sole bid, is a recognition that market conditions have changed over the past 5-6 years since the neighboring site was awarded, given factors such as increased ABSD, higher construction costs, financing costs, as well as risk premium for the SA2 (rental residential) component which is a new asset class,” Tricia Song head of research for Singapore and Southeast Asia at the property consultancy said in a statement.
The Zion Road site is the city-state’s first project designated for long-stay rental apartments with the plan also calling for a rental podium below two housing towers.
The GuocoLand-Hong Leong joint venture acquired the Upper Thomson Road site for the equivalent of S$905 per square foot of built area, with the plot representing the first government land sold in Springleaf precinct, a 30 hectare (74 acre) wooded area that the URA earmarked for development in 2022.
Wong Siew Ying, head of research and content at Propnex Realty sees reasons for the URA moving ahead with the tenders, despite the low-end bids.
“Although the land rates were below market expectations, it is likely that (the) URA considered other factors in assessing the bids,” Wong said. “For example, the Upper Thomson Road plot being in a relatively untested new housing precinct, and the Zion Road plot being the first development to comprise the long-stay serviced apartments.”
In February of this year the URA rejected a S$770.5 million joint bid by Malaysia’s GuocoLand, together with Hong Leong Holdings and Hong Leong’s TID Residential tie-up with Japan’s Mitsui Fudosan, after the JV had offered ($574 million) for a mixed residential and retail project on Marina Gardens Crescent in the Marina South area, calling the sole tender for the site, “too low.”
More Sites on the Way
The tender awards announced on Tuesday come as the Singapore government follows through on a land sale plan which includes at least 5,450 residential units and represents the largest confirmed supply of new homes in more than a decade.
The tenders for the two sites launched on Tuesday will conclude on 18 July, with analysts expecting only a few offers for each project, as developers become more cautious regarding land acquisition.
The Canberra Crescent plot can yield up to 375 homes near the Canberra MRT station, in an area where there have been no government land sales since 2020. The De Souza Avenue project could provide up to 355 homes in a neighbourhood where developers had an unsold inventory of around 400 units as of 30 March, with another 160 homes set to join that pool from another development at Bukit Timah Link.
Propnex sees the Canberra Crescent site attracting bids as high as $299 million to $334 million, which represents S$850 to S$950 per square foot of built area. The De Souza Avenue project is predicted to bring a top offer S$299 million to $334 million, which would be S$850 to S$950 per square foot of built area.
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