ANALYSIS: These two GLS tenders are closing soon
By Elizabeth Choong
/ EdgeProp Singapore |
The central location of the Zion Road (Parcel A) site is expected to attract developers and buyers. (Image source: URA)
SINGAPORE (EDGEPROP) - The tenders for the government land sales (GLS) sites at Zion Road (Parcel A) and Upper Thomson Road (Parcel B) will close on April 4. Although both sites share the same tender closing date, they have very different locational attributes and development requirements.
Both sites also have another GLS site located adjacent to them. The tender for the Upper Thomson Road (Parcel A) site will close on June 19. Zion Road (Parcel B) site is on the reserve list, so it will not be launched for tender unless it is triggered.
Another similarity is Zion Road (Parcel A) and Upper Thomson Road (Parcel A) plots are slated to be the pilot sites for long-stay serviced apartments, which require a minimum stay of three months, up from the minimum stay of seven days for existing serviced apartments.
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In this article, we examine Zion Road Parcel (A) and Upper Thomson Road (Parcel B) GLS sites to determine the pros and cons of both sites for developers and buyers.
Site #1: Zion Road (Parcel A)
The Zion Road (Parcel A) GLS site is bounded by Zion Road, Kim Seng Road, and Havelock Road. It is within walking distance of Havelock and Great World MRT Stations, Great World City, Great World Serviced Apartments, Grand Copthorne Waterfront Hotel Singapore, King’s Centre, Holiday Inn Singapore Atrium, Zion Riverside Food Centre, and River Valley Primary School. The site, located within the Bukit Merah Planning Area, is slated for residential, long-stay serviced apartment, and commercial uses on the first storey.
The 99-year leasehold site is 164,439 sq ft (15,276.8 sq m) in size and has an overall maximum gross floor area (GFA) of 920,871 sq ft (85,551 sq m). The tender documents from URA state that a minimum GFA of 581,256 sq ft (54,000 sq m) and 215,280 sq ft (20,000 sq m) must be set aside for flats and long-stay serviced apartments, respectively. URA estimates that approximately 1,170 flat units can be built on the site.
The subject site is the first GLS site with a requirement for long-stay serviced apartments, which will complement the stretch of existing hotels along Havelock Road. Developers with a hospitality REIT might be attracted to the site because the future serviced apartment could be divested to their REIT. It may also appeal to developers with a hospitality arm because it would allow them to expand their hospitality property portfolio.
Moreover, the requirement for long-stay serviced apartments could potentially reduce development risk for developers because they can build fewer residential units and hence have fewer units to sell. It will reduce the risk of them having to pay additional buyer’s stamp duty (ABSD) if they fail to sell all units before the five-year deadline.
Additionally, URA stipulates that a minimum GFA of 16,146 sq ft (1,500 sq m) and a maximum GFA of 25,834 sq ft (2,400 sq m) is allowed for commercial use on the site. A minimum GFA of 6,458 sq ft (600 sq m) must also be set aside for an early childhood development centre. The space provided for the childcare centre need not be part of the maximum cap for commercial use but must be part of the overall GFA for the whole development. An existing exit for Havelock MRT Station is located on the site and must be incorporated into the development. The commercial component, serviced apartment, and integration with the MRT station would bring much convenience to future residents.
Condos within 500m radius of Zion Road (Parcel A) GLS site
Within a 500m radius of the site, there are 16 condos with a total of 2,616 units. Of the 16 condos, only four of them have a leasehold tenure of 99 years, namely the 280-unit Emerald Park, the 66-unit Harvest Mansions, the 70-unit Up@Robertson Quay, and the 455-unit Riviere.
Among the four condos, Riviere is the newest development, having obtained its temporary occupation permit (TOP) last year. Up@Robertson obtained its TOP in 2015, while Harvest Mansions and Emerald obtained their TOP in the 1990s.
Riviere is a mixed development featuring a lifestyle hub and a serviced apartment with 72 units. Riviere was launched in May 2019, and 49 units were sold by the end of that year at an average price of $2,891 psf. Riviere was fully sold by April last year, so it is not expected to compete for buyers with the future development on the GLS site. Furthermore, the robust demand for Riviere is a good indicator of demand for leasehold condos in the neighbourhood, which should add to the appeal of the site to developers.
Source: EdgeProp Research (as at 22 March 2024)
Potential competition from nearby GLS sites
There is a launched GLS site within a 500m radius of Zion Road (Parcel A) which can yield approximately 380 housing units. The tender for the River Valley Green (Parcel A) GLS site was launched in March and will close in June. The site is located within walking distance of Great World City, Great World MRT Station, Zion Riverside Food Centre, and River Valley Primary School.
River Valley Green (Parcel A) site is in the River Valley Planning Area, which is considered to be a more prestigious area than Bukit Merah. Hence, the River Valley Green (Parcel A) site could potentially divert some developers away from bidding for the Zion Road (Parcel A) site. The future development on the River Valley Green site could also compete for buyers with the future development on the Zion Road (Parcel A) site.
The River Valley Green site is smaller, which could increase its appeal to developers because of the lower capital outlay and development risk. Moreover, the site at River Valley Green does not have a requirement for long-stay serviced apartments.
Price trend for leasehold condos in Bukit Merah
The Zion Road (Parcel A) site is located within the Bukit Merah Planning Area, which has enjoyed steady price growth due to its desirable central location. Since 2014, the average prices for new and resale 99-year leasehold condos have grown by 42.5% and 32.3%, respectively. The current average price for new condos is $2,549 psf, which is $597 psf higher than the average price for resale condos ($1,952 psf).
The strong price performance for new leasehold condos in Bukit Merah is expected to attract developers to bid for the site, while the potential capital gain from the resale market is expected to appeal to investors.
Site #2: Upper Thomson Road (Parcel B)
The second GLS site, whose tender will close on April 4th, is bounded by Upper Thomson Road and Seletar Expressway. The Upper Thomson Road (Parcel B) GLS site is within walking distance of Springleaf MRT Station and the Central Catchment Nature Reserve. The 99-year leasehold site is also located within the Yishun Planning Area and is slated for residential use. The site is 344,703 sq ft (32,023.7 sq m) in size. It has a maximum GFA of 861,766 sq ft (80,060 sq m) and a minimum GFA of 775,589 sq ft (72,054 sq m).
The site includes a conservation building that was formerly used by Upper Thomson Secondary School and Seletar Institution. The building must be restored and integrated with the future development. It can be adapted for residential and/or indoor recreational use. URA stipulates that the GFA of the conserved building must be part of the overall maximum GFA for the site.
Due to its proximity to the catchment area, the successful bidder for the site will need to incorporate biodiversity-sensitive designs, which will be reviewed by a design advisory panel chaired by URA. The future development on the site must include measures to safeguard the environment while encouraging residents to interact with nature. The environmentally friendly design of the future development and its proximity to nature are expected to appeal to buyers who are nature lovers.
Limited number of nearby condos
There are only seven condos with 328 units within a 1km radius of the Upper Thomson Road (Parcel B) GLS site. However, only Forest Hills Condominium (TOP in 2003) and The Essence (TOP in 2023) are 99-year leasehold developments.
The first sale for The Essence transacted in March 2019, and the condo was fully sold by September 2021. It is a small development with only 84 units that comprise mainly of two-bedroom units. In contrast, the Upper Thomson Road (Parcel B) site is expected to yield approximately 940 units.
Potential competition from upcoming developments
There is a lack of condos near the Upper Thomson Road (Parcel B) GLS site, but there are six new condos with approximately 2,952 units being built near the Lentor MRT Station, which is merely one stop away on the Thomson-East Coast Line. Furthermore, the tender for the adjacent Upper Thomson Road (Parcel A) site will close in June.
Developers may prefer the Upper Thomson Road (Parcel A) site because there is no conservation building on the site. However, a minimum of 50,591 sq ft (4,700 sq m) of GFA must be set aside for long-stay serviced apartments, which could deter developers without hospitality experience. On the plus side, a minimum of 16,146 sq ft (1,500 sq m) and a maximum of 21,528 sq ft (2,000 sq m) of GFA can be set aside for commercial use. A minimum of 10,764 sq ft (1,000 sq m) of GFA must also be used for an early childhood development centre. The commercial component of the future development, coupled with the adjacent Springleaf MRT, is expected to bring amenities to the development, which could make it more appealing to buyers.
The new condos in Lentor have brought more attention and buzz to the neighbourhood, which is advantageous to the future developments on the Upper Thomson Road sites. However, the Lentor condos are not fully sold, which could compete for buyers with the future developments on the Upper Thomson Road GLS sites. Furthermore, the condos in Lentor are expected to appeal more to parents because Anderson Primary School and Presbyterian High School are within a 1km radius of the Lentor neighbourhood. However, there are no schools within the same radius of the Upper Thomson Road sites.
Source: EdgeProp LandLens (as at 26 March 2024)
Lentor Modern features 605 condo units and a retail podium with a supermarket and a childcare centre. The mixed development is also linked to Lentor MRT Station. Lentor Modern achieved a take-up rate of 84% when it was launched in September 2022 at prices ranging from $1,856 psf to $2,538 psf. Lentor Hills Residences (598 units) and Hillock Green (474 units) were launched last year and achieved take-up rates of 50% and 27.6%, respectively, during their respective launches. Average launch prices for Lentor Hills Residences and Hillock Green were $2,080 psf and $2,108 psf, respectively. Since their respective launches, Lentor Modern is almost fully sold while approximately 80.4% of the units in Lentor Hills Residence is sold. The take-up rate for Hillock Green has improved to 37.3%.
This month saw the launch of Lentor Mansion (533 units) and Lentoria (267 units). Lentor Mansion achieved a take-up rate of 75% and an average price of $2,104 psf during launch, but Lentoria did not fare as well, with a take-up rate of only 18.7% at an average price of $2,120 psf. The development at Lentor Central is expected to be launched for sale next year.
Price trend for leasehold condos in Yishun
From 2014 to 2021, the average price for new sales of 99-year leasehold condos in the Yishun Planning Area grew by 18.1% to $1,319 psf. There were no new sale transactions for leasehold condos in Yishun after 2021. Stellar price growth of 56% from 2014 to this year was noted for resale condos, with the current average price standing at $1,226 psf.
Concluding thoughts
Developers have plenty of choices, with each site presenting its own pros and cons. While the Zion Road (Parcel A) and Upper Thomson Road (Parcel B) sites share the same tender closing date, their differences in location and development requirements will likely translate to two very different developments.
The central location of the Zion Road site is expected to attract young urban professionals who enjoy being in the heart of the city. Conversely, the site along Upper Thomson Road is surrounded by nature and greenery, which will appeal to buyers who prefer a more tranquil home away from the hustle and bustle of the city.
Of the two sites, the Zion Road (Parcel A) GLS site is surrounded by more new condos, but competition from neighbouring condos is expected to be limited because they are fully sold. There have been no unsold new condos near the Upper Thomson Road (Parcel B) site after 2021, but the new condos in nearby Lentor still have a few unsold units and hence could potentially compete for buyers.
Zion Road (Parcel B) GLS site is also not expected to pose much competition to Zion Road (Parcel A) because it is still on the reserve list. However, the nearby River Valley Green (Parcel A) GLS site could pose some competition for buyers as well as tender bids from developers, especially since the site is in a location that is arguably more desirable.
The tender for Upper Thomson Road (Parcel A) will close in June. This land parcel could appeal more to developers than the Upper Thomson Road (Parcel B) site because commercial use is allowed, and it is located adjacent to Springleaf MRT Station.
There are a number of newly launched condos around Lentor MRT Station, which is a stop away. The strong demand for the condos in Lentor can be considered both a plus and a minus for the GLS sites along Upper Thomson Road. While the new developments in Lentor have attracted much attention and created a lot of buzz for the area, it also begs the question of whether there is still any remaining demand from buyers for condos in the vicinity.
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