SINGAPORE, 18 July 2023 – Mr Lam Chern Woon (蓝振文), Head of Research and Consulting at EDMUND TIE comments on the tender closing of two GLS sites, namely Jalan Tembusu and Tampines St 62 (Parcel B) EC site.
Jalan Tembusu site
The Jalan Tembusu plot drew only 2 bids. Sim Lian, as well as a tie-up between CDL and Frasers Property, participated in the tender. Sim Lian submitted the top bid of $828 million or $1,069 psf ppr. Both bids were separated by a difference of just 0.1%, which is one of the lowest gaps in recent years. Notwithstanding the fact that Grand Dunman turned in the best-selling launch performance for the year over the weekend, the muted bidding interest is attributed to the fact that homebuyers would be spoilt for choice between the upcoming project (which can yield about 840 housing units) and three other recently launched large projects in the vicinity: The Continuum, Tembusu Grand and Grand Dunman.
The bid prices are about 18% lower than the winning bid by CDL for a GLS site at Jalan Tembusu in January 2022 ($1,302 psf ppr, now Tembusu Grand) and about 21% lower than the winning bid by SingHaiyi for a GLS site at Dunman Road in June 2022 ($1,350 psf ppr, now Grand Dunman). The tempered approach to the conservative bid price reflects a myriad of factors. Headwinds have intensified over the past twelve months, while hikes in buyer stamp duties and additional buyer stamp duties and elevated financing costs will continue to weigh on homebuying affordability. Rising construction costs, coupled with lower effective saleable area as a result of GFA definition policy changes, will threaten the overall profitability if a winning bid is too aggressive. Perhaps, the topmost factor in the consideration of developers is that the overall price trajectory appears more fluid, with a 0.4% qoq decline recorded in the 2Q 2023 property price index. With multiple moving parts, a conservative bid price appears to be the logical and prudent approach, in order to ensure sufficient pricing manoeuvre, amid the competition to achieve a project sell-out and qualify for the ABSD remission. Despite the fact that there were only two bidders, the close similarity of the bid prices does allude to the practical market price at this juncture. The ramp up in GLS supply for the second half of the year may also provide developers with a slew of options in the coming months and some developers may choose to wait and see how the market unfolds before joining the land bidding fray.
Tampine St 62 (Parcel B) EC site
For the Tampines Street 62 (Parcel B) EC site, there was considerably more interest with no less than seven entities putting in bids. In addition, four bidders submitted alternative proposals in a bid to raise their odds of success, reflecting the keen desire to compete in this segment. Noticeably, four entities have foreign ties, which attest to the confidence in the sustained health of the local property market among foreign developers. Developers are clearly sanguine about end-user demand for the niche public-private hybrid housing product.
The site enjoys close proximity to the upcoming Tampines North MRT station (on the Cross Island Line), while the upcoming mixed-used development at Tampines Ave 11, which is a stone’s throw away, will provide adequate retail, F&B and services amenities for future residents. The Tampines Ave 11 development is also integrated with a bus interchange, a community club and a hawker centre. The precinct houses a number of HDB neighbourhoods which were completed recently, and will provide a fertile source of upgrading demand in due course as HDB residents meet their Minimum Occupation Period (MOP). The easy accessibility to the Tampines Regional Centre and Changi Airport are also pull factors. Competition from EC supply is limited, as Tenet (neighbouring parcel) is around 97% sold, seven months since its launch last December. Another EC project in Tampines, Parc Central Residences, was launched in early 2021 and is fully sold out.
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Seah Li Ching (Ms)
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