Bids for two plots in Bukit Timah and Hillview surprised market watchers this week. It was expected that these medium-sized plots in proven areas would attract the attention of developers; especially with new launches seeing continued demand and low supply of new homes. However, developer interest was lackluster; and that may worry anyone hoping to strike bulk deals this year.
Two GLS sites with remarkable locations
The Bukit Timah Link site (99-year lease) has land area of approximately 4,611 m² and net floor area of 13,834 m². This is a small parcel which would yield around 160 units.
The location of the Bukit Timah land will be instantly recognizable to most market watchers: it is located next to [email protected] World, one of the best-selling projects in 2021. ([email protected] World sold 115 of its 120 units during its launch weekend).
Like its counterpart under construction, this site offers walking access to the Beauty World MRT (Downtown Line), as well as the Beauty World Plaza. Additionally, the land at Jalan Anak Bukit, just across the road, will add a major commercial component when completed (see below).
The winning bid for this site came from Bukit Sembawang Estates at $1,343.13 psf, or $200 million. This is a notable jump of more than 15% from the second highest bid (Wing Tai) at $1,161.05 per square foot. This is a surprising price given that Jalan Anak Bukit GLS was sold for $989.4 psf, even though that was over a year ago.
The second GLS site was Hillview Rise (99 year lease). This site surface is approximately 10,395 m², with a SHON of 29,107 m². This is sufficient for a small development of around 335 units.
This site is across from Midwood, which launched in 2019 and is currently under construction. This site is within walking distance of the Hillview MRT (Downtown Line), and is notably close to the HillV2 shopping center (just across the road). The Rail Mall is also about a five minute drive from here.
The winning bid for this site came from Far East Organization at $1,023.85 per square foot, or $320.78 million. This only narrowly exceeded CDL’s offer, the second highest at $1,011.16 psf.
|BIDDERS||OFFER PRICE (S$M)||S$PSF PPR|
|RISE OF HILLVIEW|
|Far Eastern Civil Engineering (Far East Organization) and the Sekisui house||320.78||1,023.85|
|CDL Constellation (City Developments)||316.80||1,011.16|
|United Venture Development No. 6 (UOL Group and Singapore Land Group)||308.38||984.28|
|Sim Lian land and development of Sim Lian||283.00||903.27|
|BUKIT TIMAH LINK|
|Bukit A (Bukit Sembawang Estate)||200.00||1,343.13|
|Winchamp investment (Wing Tai)||172.89||1,161.05|
|Sims Park (Far East Organization)||161.78||1,086.42|
|TID Residential (Hong Leong Holdings and Mitsui Fudosan)||138.49||930.00|
Locations attracted fewer offers than expected
Market watchers noted that Hillview Rise only attracted four bids, with a difference of just over 13.3% between the lowest and highest bids. The Bukit Timah Link site also only attracted five bids, despite the attractive location on the outskirts of town and the proven success of Linq @ Beauty World.
Market watchers expected higher bids for these sites for two main reasons:
The first is that both sites are considered small, with fewer units to move. This is critical in today’s market, where developer ABSD rates are high and developers must complete and sell every unit in five years.
The low number of offers suggests small developments or not, developers are inclined to play it safe in 2022.
The second reason is that the new introductory prices of $2,000 psf are normalizing, even for properties in outlying areas, and demand is increasing due to the shrinking supply of housing. Both conditions were expected to increase developer confidence.
Nevertheless, the estate agents we spoke to said that despite the lower number of offers, prices are broadly in line with expectations. They expect eventual prices to be above $1,800 psf for Hillview Rise land, and prices to be north of $2,200 psf for Bukit Timah Link land.
What deters developers from biting?
Estate agents have identified the September 2022 cooling measures as one of the possible reasons. A real estate agent said the market is taking time to adjust to cooling measures and buyers may resort to a wait-and-see approach in the aftermath of 2022.
She believes the recent round of cooling measures is “particularly impactful due to lending restrictions” such as the increase in the interest rate floor, which may disqualify more HDB upgrade companies from more expensive new launches.
Another realtor said that for Bukit Timah Link land, one of the issues is the 3.22 hectare land of Jalan Anak Bukit which Far East Organization and Sino Group reclaimed in 2021. This is just in opposite Linq @ Beauty World and Bukit Timah Link’s Trace; and it is an integrated development that will include 700 residential units and 150 serviced apartments.
The estate agent believes that developers want to avoid competing with such upcoming integrated developments, which buyers have been more inclined towards since the few recent such projects.
On top of that, there are some concerns about the general performance of new launches here before. It can be said that only The Linq @ Beauty World sold well. Others like Midwood, Dairy Farm Residences and Verdale certainly saw slow sales at first, only to pick up once supply was limited in other parts of Singapore.
Cautious developers may be bad news for those looking for bulk offers
The general consensus on the ground is that, for developers buying in 2022, chances are they will have to launch during an expected recession in 2023 or 2024.
Of particular concern is rising interest rates – these not only increase financing costs for developers, but they also impact the affordability of homes, and HDB upgrades (the majority of buyers ) are increasingly excluded from new launches. High interest rates can also deter investors from real estate assets, for example if rates begin to significantly reduce yields and rental returns.
Currently, block sales for 2022 have topped last year as early as July; but we have yet to see the effects of rising interest rates being felt.
If developers aren’t rushing to GLS sites, however, that’s a worrying omen for those relying on bulk sales.
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