Behind the bullish bids for GLS sites in Tanah Merah and Yishun

/ EdgeProp Singapore |
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SINGAPORE (EDGEPROP) - The government land sales (GLS) tender for a mixed-use site at Tanah Merah Kechil Link closed with 15 bids on Oct 29, while an executive condominium (EC) site at Yishun Avenue 9 drew seven bids at the close of its tender on the same day.
Chinese developer MCC Land submitted the top bid of $248.99 million for the Tanah Merah Kechil site, which fronts Tanah Merah MRT Station on the East-West Line. The new development will be mixed-use, with commercial space of about 21,528 sq ft on the ground floor, and about 265 residential units on the upper floors. The entire development has a maximum permissible gross floor area (GFA) of 267,644 sq ft.
“We’re very happy to be the top bidder for the Tanah Merah Kechil Link site, and we are very confident of developing an exciting residential landmark with about 21,500 sq ft of retail space on this relatively sizeable site,” says Tan Zhiyong, CEO of Chinese developer MCC Land (Singapore). “It will be a highly liveable environment brimming with smart and sustainable features. We will develop something that is creative, that will build an identity for MCC Land.”
Chinese developer MCC Land submitted the top bid of $248.99 million for the GLS mixed-use site beside Tanah Merah MRT Station. (Picture: Samuel Isaac Chua/The Edge Singapore)
MCC Land’s bid of $248.99 million translates to a land rate of $930.34 psf per plot ratio (ppr) for the 95,587 sq ft, 99-year leasehold site. The differential between MCC Land’s and the second highest bid was just 4.6%, says Desmond Sim, CBRE head of research for Singapore and Southeast Asia.
Based on the bid price, Nicholas Mak, head of research & consultancy at ERA Realty, estimates the breakeven cost for the new condominium project at the mixed-use site to be in the $1,480 to $1,540 psf range.
“This GLS site is arguably the most attractive on the Confirmed List of the GLS programme for 1H2020,” comments Mak. “It is located in an established residential area and next to Tanah Merah MRT Station. Furthermore, there is a very limited supply of vacant development land near that station.”

‘Hungry for attractive development land’

The 15 bids are an indication that “developers are hungry for attractive development land”, notes Mak. However, the bids reflect caution too, as most of the bids were near the median land rate of $825 psf ppr, he adds. “The relatively small site also makes it attractive to medium-sized and smaller developers.”
On the opposite side of Tanah Merah MRT Station is the 720-unit Grandeur Park Residences, which is expected to be completed by the end of this year. Median transacted price at Grandeur Park Residences is $1,534 psf, notes ERA’s Mak. Only four units — predominantly four- and five-bedroom premium units — are still available at the private condominium, which was launched in March 2017 and comes with a childcare centre and two shops.
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The top bid for the Tanah Merah GLS site means that the developer will have to sell the new apartments on the site for about $1,700 to $1,800 psf, “which is bullish, considering that new units in that area are currently trading between $1,500 and $1,600 psf”, says Karamjit Singh, chief executive of Showsuite Consultancy.
MCC Land’s Tan: We will develop something that is creative, that will build an identity for MCC Land. (Picture: Samuel Isaac Chua/The Edge Singapore)
The new residential development is likely to be launched in late 2021, when homebuying demand is expected to improve alongside an expected economic recovery, says Ong Teck Hui, JLL senior director of research & consultancy. The stronger-than-expected tender participation for this mixed-use site is indicative of a growing demand for residential land among property developers, adds Ong. “If the GLS programme continues to be conservative in offering sites for sale, there could be a spillover effect into the collective sales market to meet demand from developers,” he says.
Showsuite’s Singh agrees, saying: “Developers’ confidence in the residential market would also have been bolstered by the encouraging new home sales over the past five consecutive months. As they have been steadily selling down their stock, they would now need to start planning their land acquisitions and pipeline supply for the next two years. With the subsequent GLS tenders only closing in March and April next year, this bodes well for the private land market to cater to the shortfall in supply.”

Highest bid price in the OCR; among the highest for an EC site

Lee Sze Teck, director of research at Huttons Asia, notes that the top bid for the Tanah Merah Kechil Link site is “the highest submitted for a GLS site in the Outside Central Region (OCR)”. He attributes this to dwindling unsold inventory of uncompleted units, which has led to “an urgency” among developers to replenish their land bank.
“There could be an increase in confidence among developers that the economy has seen its worst and will return to growth in 2021/2022,” says Lee. “The palatable bid size for the plot could be another reason.”
According to Tricia Song, head of research for Singapore at Colliers International, the high number of bids for the Tanah Merah GLS site exceeded her expectations. “This is the highest number of bids since the Holland Road commercial and residential site (concept and price) tender in May 2018 which drew 15 bids from 10 consortiums,” she says. “This is also much higher than the four to nine bids seen for private residential GLS sites over the past 18 months.”
Sing Holdings submitted the top bid of $373.5 million ($576 psf ppr) for the EC site on Yishun Ave 9. (Picture: Samuel Isaac Chua/The Edge Singapore)
Likewise, the EC site at Yishun Avenue 9 attracted a higher-than-expected top bid price of $373.5 million from Singapore-listed property developer Sing Holdings. The price translates to a land rate of $576 psf ppr. “[The bid price] is better than market expectations that range from $500 to $550 psf ppr,” says Wong Siew Ying, head of research and content at PropNex Realty.
“The land rate of $576 psf ppr is also among the highest for an EC site,” adds Wong, pointing to the Tampines Avenue 10 EC site that fetched $578 psf ppr in January 2019, and the record price of $583 psf ppr for the Sumang Walk EC site in March 2018. The Sumang Walk site was launched for sale last year as Piermont Grand by City Developments Ltd (CDL) and joint-venture partner TID.

Combination of factors

Sing Holdings’ bid is 8.9% higher than the second highest bid of $342.9 million submitted by CDL’s wholly-owned entity, Maximus Residential SG.
“The site has quite a few characteristics that would make the future project an exciting one, and that’s why we really wanted the site and bid at the price [that we did],” says Lee Sze Hao, CEO and managing director of Sing Holdings. “In view of the circumstances and the costing, this was the price that we were prepared to do it at.”
Before buying the site in Yishun, Lee paid a visit to the area for the first time. “I hadn’t visited Yishun until then,” he admits. The last two ECs launched in Yishun were both in 2015, namely Signature at Yishun and The Criterion, located next to each other. “Our EC project will be the next, and it will be sometime in 2021-2022, which is six to seven years after the last two EC projects were launched,” Lee points out.
He attributes the attractiveness of the EC site to a combination of factors: As the new EC project is likely to be launched only 15 months down the road, all the uncertainties today could have stabilised to a new norm. “And the safest bet for home buyers is still an EC,” he says.
Lee of Sing Holdings: The site has quite a few characteristics that would make the future project an exciting one, and that’s why we really wanted the site and bid at the price [that we did]. (Picture: Samuel Isaac Chua/The Edge Singapore)
Since September last year, the combined monthly household income for EC home buyers was raised to $16,000 (from $14,000 previously). This further increases the eligibility of more home buyers who aspire to own private property, adds Lee.
The EC site at Yishun Avenue 9 is located about 1.6km from the Yishun MRT Station at Northpoint City, which is just a short bus ride away, Lee says. The Northpoint City is a 1.33 million sq ft mall and is linked to many amenities including a community club and regional library. Khoo Teck Puat General Hospital and Community Hospital is nearby, and for parents of young children, Chong Fu Primary School, a good school, is located within 1km of the new EC site, adds Lee.
Another attraction of the EC site in Yishun Avenue 9 is its proximity to the upcoming 40ha nature park at Khatib Bongsu, a mangrove and mudflat habitat announced by the National Parks Board in March. “The new EC site offers an unblocked view of the nature park and the water,” says Lee. “Families can enjoy the many lifestyle amenities — kayaking and visiting the nature park, Yishun Park and the many clubs, namely Safra Yishun Country Club and Orchid Country Club.”

‘Robust’ end-user demand

With a maximum GFA of about 648,441 sq ft, the new EC site at Yishun is likely to have about 600 units, estimates Lee. The blocks will be oriented such that all the units will be north-south facing, which is ideal as it maximises cross-ventilation as well as natural light. Units are likely to be a mix of two- to five-bedroom apartments, which caters to young couples, families with children, as well as multi-generational or extended families who want to live together.
The land rate submitted by Sing Holdings is higher than the rates for the two EC sites launched for sale in 2019, notes ERA’s Mak. “At the land rate of $576 psf ppr, the estimated breakeven cost is about $1,000 to $1,050 psf. The developer will probably plan to launch the new EC at prices above $1,100 psf.”
According to JLL’s Ong, the last EC tender at Fernvale Lane, which closed in March 2020, fetched a top bid of $555 psf ppr. Three EC projects are in the pipeline for launch: the 700-unit Parc Central Residences at Tampines Avenue 10 by Hoi Hup Realty and Sunway Developments; Provence Residence at Canberra Link by MCC Land, which could comprise 413 units; and the upcoming project at Fernvale Lane by Frasers Property, which could house 499 units.
Total new and unsold EC units at the end of 3Q2020 fell to 632 units from 829 units in 1Q2020, adds JLL
End-user demand for ECs is expected to be “robust” considering the sales performance of Signature at Yishun and The Criterion, the two most recent projects in Yishun, notes PropNex’s Wong. She expects the potential launch price for the future EC to range from $1,100 to $1,200 psf.

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