The government land sales (GLS) tender for the Tanah Merah Kechil Link mixed-use site closed with 15 bids on Oct 29, while the Yishun Avenue 9 executive condominium (EC) site issued seven bids at the end of its tender on the same day.
The highest offer of $248.99 million was presented by Chinese developer MCC Land for the Tanah Merah Kechil property, which faces Tanah Merah MRT Station on the East-West Side. With industrial space of about 21,528 sq ft on the ground floor, and about 265 residential units on the upper floors, the new building would be mixed-use. There is an overall allowable gross floor area (GFA) of 267,644 sq ft for the whole development.
“We are very pleased to be the Tanah Merah Kechil Link site’s top bidder, and we are very sure of building an exciting residential landmark on this reasonably large site with around 21,500 sq ft of retail space,” says Tan Zhiyong, CEO of MCC Land (Singapore), a Chinese developer. It would be an extremely liveable community full of clever and sustainable characteristics. We are going to make something that is innovative, that is going to establish an identity for MCC Property.
For the 95,587 sq ft, 99-year leasehold site, the offer by MCC Land of $248.99 million converts to a land rate of $930.34 psf per plot ratio (ppr). According to Desmond Sim, CBRE research head for Singapore and Southeast Asia, the difference between MCC Land’s and the second highest bid was just 4.6 percent.
Nicholas Mak, head of analysis & consulting at ERA Realty, predicts the breakeven cost for the new condominium project at the mixed-use site to be in the region of $1,480 to $1,540 psf on the basis of the offer amount.
This GLS site is arguably the most enticing on the GLS Software Verified List for 1H2020, “Mak remarks.” “It is situated in a developed residential area and next to MRT Station Tanah Merah. In addition, near that station, there is a very restricted supply of vacant construction property.
Hungry for attractive land for construction.
“Hungry” for Government Land Sales (GLS)
The 15 bids are a sign that, Mak says, “developers are hungry for desirable land for growth.” The bids, however, also reflect caution, as most of the bids were close to the $825 psf ppr median land rate, he adds. “The comparatively tiny site often renders medium-sized and smaller developers appealing.”
The 720-unit Grandeur Park Residences are on the opposite side of Tanah Merah MRT Station, and is scheduled to be done by the end of this year. The median price at Grandeur Park Residences is $1,534 psf, ERA’s Mak says. In the private condominium, which was opened in March 2017 and comes with a childcare center and two stores, only four apartments, mostly four- and five-bedroom luxury units, are still open.
The Tanah Merah GLS site’s top offer indicates that the developer will have to sell the new apartments on the site for around $1,700 to $1,800 psf,’ which is bullish, given that new units are currently selling between $1,500 and $1,600 psf in that location,’ says Karamjit Singh, Showsuite Consultancy’s chief executive.
Ong Teck Hui, JLL senior director of analysis & consulting, says that the latest residential construction is anticipated to be introduced in late 2021, as home buying demand is expected to increase along with an expected economic recovery from current Covid Pandemic. For this mixed-use location, the high number of tender participation is reflective of an increasing demand among property developers for residential land, adds Ong. If the GLS program tends to be cautious in providing sites for rent, a spillover impact could arise in the joint sales sector to satisfy developer demand, “he says.”
“Singh agrees with Showsuite, saying:” The trust of developers in the residential sector over the past five consecutive months will also have been enhanced by the promoting new home sales. They will now need to start preparing their land purchases and pipeline supply for the next two years as they have been slowly selling down their stock. With the ensuing GLS tenders only closing in March and April next year, this bodes well for the supply deficit to be resolved by the private land sector.
Highest Bid for EC Site
Lee Sze Teck, research director at Huttons Asia, states that “the highest bid received for a GLS site in the Outer Central Area (OCR)” is the top bid for the Tanah Merah Kechil Connection site. He attributes this to the declining inventory of unfinished units that has contributed to the “urgency” for developers to replenish their land banks.
“An improvement in trust among developers may be because the economy has seen its worst and would return to growth in 2021/2022,” Lee says. “Another explanation may be the palatable bid size for the parcel.”
The large number of bids for the Tanah Merah GLS platform surpassed her hopes, according to Tricia Song, head of analysis for Singapore at Colliers International. Since the Holland Road commercial and residential site (concept and price) tender in May 2018, which attracted 15 bids from 10 consortiums, this is the largest amount of bids, “she says.” “This is also far better than the four to nine offers during the past 18 months seen for private residential GLS locations.”
Likewise, from Singapore-listed property developer Sing Holdings, the EC site at Yishun Avenue 9 attracted a higher-than – expected top bid price of $373.5 million. The price converts to a $576 psf ppr land average. “[The offer price] varies from $500 to $550 psf ppr, higher than industry estimates,” says Wong Siew Ying, Head of Analysis and Content at PropNex Realty.
“For an EC location, the land cost of $576 psf ppr is also among the best,” Wong adds, referring to the Tampines Avenue 10 EC site that collected $578 psf ppr in January 2019, and the peak price for the Sumang Walk EC site of $583 psf ppr in March 2018. City Developers Ltd (CDL) and joint-venture company TID unveiled the Sumang Walk location for sale last year as Piermont Grand.
Strong Attributes of the Site Location
The offer by Sing Holdings is 8.9 percent more than the second largest proposal made by CDL’s wholly-owned subsidiary, Maximus Residential SG, of $342.9 million.
The area has quite a few features that will render the potential project an interesting one, and that’s why we always chose the location and offer at the price [that we did],” says Lee Sze Hao, Sing Holdings’ CEO and Managing Director.” “Given the requirements and the expense, this was the price at which we were prepared to do it.”
Lee paid a visit to the city for the first time before purchasing the place in Yishun. “Before then, I hadn’t visited Yishun,” he admits. The last two ECs that were introduced in Yishun were both placed next to each other in 2015, namely Signature at Yishun and The Criteria. “Our EC project will be the latest, which will take place sometime in 2021-2022, six or seven years after the launch of the last two EC ventures,” Lee points out.
It attributes a variety of factors to the attractiveness of the EC site: because the latest EC project is likely to be implemented just 15 months down the line, all the uncertainties today should have stabilized to a new level. “And the best bet is always an EC for home sellers,” he notes.
The cumulative monthly household income for EC home buyers has been increased to $16,000 (from $14,000 previously) since September last year. Lee adds that this also enhances the eligibility of more home owners wanting to purchase private homes.
The EC site at Yishun Avenue 9 is about 1.6 km from Northpoint City’s Yishun MRT Station, which is only a quick bus ride away, Lee says. A 1.33 million sq ft mall, The Northpoint Area is synonymous with multiple facilities, including a youth club and regional library. Khoo Teck Puat General Hospital and Community Hospital are nearby, and Chong Fu Primary School, a successful school for parents of young children, is situated within 1 km of the new EC location, Lee said.
Another draw at the EC site at Yishun Avenue 9 is its proximity to the forthcoming Khatib Bongsu 40-hectare nature park, a mangrove and mudflat ecosystem declared in March by the National Parks Board. “The current EC site has an unblocked view of the river and the nature park,” Lee notes. “Kayaking and enjoying the nature park, Yishun Park and the several clubs, including Safra Yishun Country Club and Orchid Country Club, families will appreciate the many lifestyle facilities.”
Robust Demand from Homebuyers
With a maximum GFA of about 648,441 sq ft, it is possible that the new EC site at Yishun would have around 600 units, Lee figures. The blocks would be aligned such that all the units are facing north-south, which is desirable since it maximizes both cross-ventilation and natural light. Units are expected to be a combination of apartments of two to five bedrooms, ideal for young adults, families with teenagers, and multi-generational or extended families that choose to reside together.
ERA’s Mak states that the land bid given by Sing Holdings is higher than the prices for the two other executive condo sites launched for sale last year. “The projected breakeven cost at the land rate of $576 psf ppr is around $1,000 to $1,050 psf. It is probable that the developer will intend to sell the latest EC at prices over $1,100 psf.
From JLL’s Ong, a top offer of $555 psf ppr was received from the last executive condo tender at Fernvale Lane that closed in March 2020. Three EC ventures are in the pipeline for launch: Hoi Hup Realty and Sunway Developers’ 700-unit Parc Central Residences at Tampines Avenue 10; MCC Land’s Provence Residence at Canberra Connect, which could contain 413 units; and Frasers Property’s forthcoming Fernvale Lane scheme, which could house 499 units.