Despite developers' low unsold private house inventory, caution pervades at state land auctions

The premium site near Beauty World station receives only 5 offers, while the Hillview Rise plot receives 4 bids.

Nov 04, 2022

The latest government land sales (GLS) tender closings for two 99-year leasehold private home sites near Beauty World and Hillview MRT stations were met with scepticism.

The number of offers received was lower than expected by the market.

The highest offers for both plots, however, were within the range of estimates given by property consultants polled before to the bidding for the two sites closing on Thursday (Nov 3).

Four proposals were received for the Hillview Rise site, which has the potential to yield around 335 dwellings. Far East Organization and Sekisui House teamed up to put the winning bid of S$320.78 million, or almost S$1,024 per square foot per plot ratio (psf ppr).

Five offers were received for a site on Bukit Timah Link, near the Beauty World MRT station.

Bukit Sembawang Estates' maximum bid of S$200 million, or S$1,343.13 psf ppr, was 15.7% higher than Wing Tai's second-highest bid.

"It was expected that the Bukit Timah Link property, which is relatively small and so less hazardous, would create greater interest among developers," said JLL Singapore's senior director of research and consultancy, Ong Teck Hui. The top bid, on the other hand, was far more hopeful than the second-highest bid. While the inventory of unsold units remains low and developers need to refill their land banks, there appears to be more caution in bidding for sites in light of rising interest rates, the consequences of recent cooling measures, and macroeconomic uncertainty."



This is the first tender to close since the late-September property cooling measures.

Nicholas Mak, the head of research and consultancy at ERA Realty Network, also pointed out that the maximum bid of S$1,023.85 psf ppr for the Hillview Rise site is lower than the S$1,068 psf ppr land rate paid in 2018 for the neighbouring Midwood condo site. "The Midwood and Hillview Rise sites are only approximately 230 metres apart," Mak remarked.

The top price of S$1,023.85 psf ppr for the current Hillview Rise site was only 1.3 percent more than City Developments' second-highest bid. One reason for the relatively close bids for this site, according to Edmund Tie's head of research and consulting, Lam Chern Woon, could be that developers are concerned about supply and price competition from the future development on the Dairy Farm Walk site, which was awarded in March this year at a significantly lower S$980 psf ppr.

The wait-and-see strategy

Knight Frank's head of research for Singapore, Leonard Tay, summarised Thursday's tender closing: "The economic outlook has taken a negative turn with rising interest rates, inflation, and recessionary pressures." Despite this, developers are nonetheless eager to acquire property in order to give new products to an under-supplied private residential market."

"These are definitely trying times for developers, as they must handle the risks of high building costs, government intervention with cooling measures, paying non-remissible Additional Buyer's Stamp Duties (ABSD), and selling out within five years to avoid additional ABSD." Another setback for developers is a change in floor space definitions, which will include air-conditioner ledges as gross floor area; the modifications will reduce developers' saleable area and margins for condo developments."

Furthermore, with rising loan rates, developers must now consider if some homebuyers will prefer to sit on the sidelines and wait for economic worries to pass, according to Tay.

Tricia Song, CBRE's South-east Asia head of research, anticipates launch pricing of S$1,800 to 1,900 per square foot (psf) for the new project on the Hillview Rise plot, and S$2,200 to 2,300 psf for the new building on the Bukit Timah Link plot.

"We want to curate a cosmopolitan village lifestyle within a 20-storey development with 160 apartment units, which we believe would attract to young families and investors," said Chng Kiong Huat, chief executive of Bukit Sembawang, the winning bidder for the Bukit Timah Link plot. This lifestyle idea will appeal to purchasers looking for a distinctive lifestyle as they enjoy the gentrification and change of the Beauty World Precinct." The Bukit Timah Nature Reserve and Bukit Batok Nature Park, as well as other shopping and food and beverage options, are both within walking distance of the site.

Far East Organization executive director Marc Boey, speaking on behalf of the company's joint venture with Sekisui House, stated that the Hillview Rise site represents a "excellent opportunity for the two of us to create another notable residential property project in the Upper Bukit Timah enclave."

The partners' proposed scheme for the Hillview Rise property includes two 27-story blocks with around 330 private dwellings.

The Hillview Rise property lot is located within an established private residential development and is conveniently accessible via main roads/expressway and the Hillview MRT station.

Nearby schools include CHIJ Our Lady Queen of Peace and Assumption English School. Nearby shopping complexes such as The Rail Mall and HillV2 offer a diverse range of shopping, dining, and entertainment opportunities. The property is close to Hillview Community Club and Bukit Batok Nature Park.