Are Recent lower Bids in Government Land Sales (GLS) Likely to be Awarded?
Zion Road (Parcel A) stands out as an innovative GLS site featuring serviced apartments with a minimum stay requirement of three months. Conveniently situated near Havelock MRT station on the Thomson East Coast Line (TEL), it connects Singapore's Northern and Central-East regions, providing exceptional accessibility for residents and tenants.
On the other hand, Upper Thomson Road (Parcel B) offers a valuable residential opportunity, with an expected 940 residential units.
Both sites attracted only one bidder each, with Zion Road (Parcel A) achieving a notable bid of $1,202 psf ppr, while Upper Thomson Road (Parcel B) received a competitive bid of $905 psf ppr.
These locations are highly desirable for residential living, benefiting from direct MRT access and picturesque views.
In comparison, the previous site awarded near Zion Road (Parcel A), Jiak Kim Street, sold for $1,733 psf ppr in December 2017. However, recent cooling measures since July 2018 and rising construction and borrowing costs have impacted market conditions. The alignment of Gross Floor Area (GFA) regulations has also affected land prices, resulting in a decrease in saleable area by about 5 to 6%.
The relatively lower land price for Zion Road (Parcel A) may be linked to the inclusion of long-stay serviced apartments in the tender. Given the inherent risks associated with this emerging asset class, developers need to consider these uncertainties in their bids. Separating the long-stay serviced apartments could enhance the appeal of both sites to potential investors.
In the vicinity of Zion Road, existing hotels and serviced apartments command premium daily rates starting at $300 (excluding taxes and GST) for serviced studio apartments. In contrast, rates for 4 to 5-star hotels are comparable or higher, exceeding 50% of rental costs for one-bedroom condos in the area. Developers could target mid to premium segments by positioning long-stay serviced apartments to attract transient professionals and medical tourists, given proximity to SGH, one-north, and NUS.
For Upper Thomson Road (Parcel B), the nearest GLS site, Lentor Central, was sold at $982 psf ppr in September 2023. However, with an estimated 940 units available, Upper Thomson Road (Parcel B) entails larger development risks, which may explain the slightly lower bid.
