Zion Road & Upper Thomson sites expecting cautious response
Market participants expect fewer bidders to participate in this land tender round, with three large lots released at the same moment, two of them having almost 1,000 units. The high cost of construction, the macroeconomic uncertainty and increased interest rates will continue to affect developers.
The four projects are expected to produce about 3,360 residential apartments in total, including new long-stay serviced apartment, and two large projects each of around 1,000 units. Last week, Nov. 29, it was announced that the pilot would include a new category of serviced apartment in GLS locations.
It is necessary to stay for a minimum of three months as opposed to just seven days, which was the case with regular serviced apartments. This is a measure designed in order meet the increasing rental demand in recent years that has led residential rents up.
The Zion Road (parcel-A) plot may be “a plum location”, but its size could deter bidders.
Wong predicts that the highest bid will be between S$1.47bn to S$1.66bn based on land costs of S$1,600-1,800 per square feet per plot ratio.
It is not all developers’ expertise that can operate a Serviced Apartment. Also, the capital investment for serviced flats will be upfront and developers need to have ample liquidity.
In the current hospitality sector, manpower is a problem. “A rethink about how to provide better service using less manpower” would be required.
The developers may want to divest their serviced apartment portfolio to their Real Estate Investment trusts (Reits) because of the separate strata title for residential and serviced units.
It is possible to reduce the risk of the project by having a portion built as serviced apartments. This will allow developers to have fewer residential units available for sale within the five-year time frame required for Additional Buyer’s Duty exemption.
A stay of at least three months can result in lower operating costs than running a typical serviced apartment or hotel.
Riviere 455 unit development is located on Jiak Kim Street. This was the last GLS sale in the area. Frasers Property, which won the bids with S$955.4 million (or S$1,733psfppr) in December 2017, was awarded this site.
It was first launched for sale in April 2019 and has since been fully sold. According to caveats, the average selling price is S$3,066/sqft. Jiak Kim Street comprises 72 serviced flats.
Developers may partner with a group that has experience in the hospitality industry, like CapitaLand or Frasers.
Upper Thomson Road has not been tested for serviced residences, so developers would be required to take on significant risks.
Experts predict that developers will remain cautious regarding the Upper Thomson Road Sites given their relatively quiet location amongst landed housing as well the large number of private homes being built in the Lentor Area.
Upper Thomson Road, parcel A may attract a top offer of S$636 to S$723 or SS$1,100 psf ppr. Experts expect the Upper Thomson Road parcel B site to receive bids up to S$862 – S$948 mln, equivalent to S$1,000 – S$1,100/sq.ft.ppr.
Recently, in September, an auction for a Lentor Central site sold for S$435mil or S$982psfppr. This is the 6th plot that the government has sold in this area where there will be close to 3000 new private houses.
The two Upper Thomson sites, located near the Central Catchment Nature Reserve, will also require biodiversity-sensitive urban design strategies in their proposed developments.
The Upper Thomson Road plot (parcelB) also needs to be integrated into the existing building of Seletar Institute.
The sale of two state-owned land plots to test out a new form of rental housing was launched on Monday, Dec 4. Analysts anticipate a cautious response by developers.
The site at Zion Road could produce a project of 1,170 residential apartments, including up to 435 serviced units. This will be located near Orchard Road in the River Valley, a prime residential district.
The second site, located at Upper Thomson Road in a newly developed housing precinct, would result in 640 residential apartments including 100 serviced units.
These two sites were among four other plots released Monday by the Urban Redevelopment Authority in accordance with the 2023 government land sales programme.
The Upper Thomson Road sites (parcels A & B) and Zion Road site (parcel A), as well as the Zion Road plot (parcel B), are both on the list of confirmed sites.