Tenders closing for URA sale sites at Upper Thomson Road and River Valley Green

SINGAPORE , June 19, 2024 – Tender closed today for two Government Land Sales (GLS) sites at Upper Thomson Road (Parcel A) and River Valley Green (Parcel A).

_{*A minimum 1,000 sqm GFA for childcare centre and minimum 4,700 sqm of long-stay serviced apartment (SA2) is stipulated for the site.
Source: URA, JLL Research}

Ms. Chia Siew Chuin, Head of Residential Research, Research & Consultancy at JLL
谢岫君, 私宅市场研究部主管 (新加坡) commented:

The lack of interest in the site can be attributed to it being in a rather untested new private residential area, particularly for high-rise developments and serviced apartments.

The inclusion of a long-stay serviced apartment (SA2) component requires niche expertise to develop and operate serviced apartments as well as higher upfront capital expenditure for such a project undertaking. Moreover, the requirement to incorporate biodiversity-sensitive designs and environmental safeguards due to the site’s proximity to the catchment area, may potentially add to overall capital outlay.

Developers may also be tentative due to the relatively quieter location and the absence of comprehensive amenities and schools in the neighbourhood may also represent a risk.

The abundance of competing supply from the neighbouring Upper Thomson Road (Parcel B) and the nearby Lentor area is likely to be another deterrent. The Upper Thomson Road (Parcel B) site is expected to yield some 940 residential units. Additionally, as of the time of writing, there is an unsold inventory of about 1,108 units from six upcoming projects in the Lentor area around the Lentor MRT Station, which is only one stop away on the Thomson-East Coast (TEL) Line.

The low level of interest in the tender for the River Valley Green (Parcel A) GLS site shows that developers remain cautious even though they are still inclined towards smaller plots. This reflects a strategic and calculated move by developers in replenishing their land bank while also reducing capital outlay and mitigating development risks. This is driven by the prevailing tentative market sentiment resulting from still-high interest rates, macroeconomic uncertainties and the impact of prohibitive ABSD rates on property investors and foreign buyers.

The top bid of $1,325 psf ppr for the subject site, which is designated for a pure residential development, is 12.5% below the $1,515 psf ppr that City Developments Limited paid in January 2020 for the Irwell Bank Road site, where Irwell Hill Residences is now located. Compared to the $1,202 psf ppr that the nearby Zion Road (Parcel A) with an SA2 component attained in April 2024, the top bid for the subject site is 10.3% higher. The price takes into account that the subject site is intended solely for the development of residential units for sale.

The next price bid for the subject site is just 4.1% lower, suggesting that both developers share a fairly common assessment of the current market conditions. The measured bids also reflect developers’ reduced risk appetite in the light of more challenging market conditions marked by higher costs, heightened risks and slowing new home sales.

However, lower land prices do not necessarily translate into reduced selling prices for future launches as developers need to account for development costs, risks, and profit margins. Therefore, the pricing of newly launched units will continue to be aligned with prevailing market prices at the time of their launch.

At a land cost of $1,325 psf ppr, launch prices of residential units on the subject site could sell at prices starting from $2,700 psf and the breakeven cost is estimated at about $2,300 - $2,500 psf, depending on technical, material and design considerations.