Are Recent lower Bids in Government Land Sales (GLS) Likely to be Awarded?
Zion Road (Parcel A) emerges as a pioneering GLS site introducing serviced apartments with a minimum 3-month stay requirement. Strategically located near Havelock MRT station on the Thomson East Coast line (TEL), bridging Singapore's Northern and Central-East sectors, it offers unparalleled convenience for residents and tenants seeking mobility across the island.
Meanwhile, Upper Thomson Road (Parcel B) presents a prime residential opportunity, boasting an anticipated 940 residential units.
Despite attracting only one bidder each, Zion Road (Parcel A) secured a remarkable bid of $1,202 psf ppr, while Upper Thomson Road (Parcel B) fetched a competitive $905 psf ppr bid.
Both sites hold significant appeal for residential living, benefiting from direct MRT access and scenic vistas.
Comparatively, the previous site awarded in the vicinity of Zion Road (Parcel A), Jiak Kim Street, commanded $1,733 psf ppr back in Dec 2017. However, subsequent cooling measures since July 2018, coupled with escalating construction and borrowing costs, have tempered market dynamics. The harmonization of Gross Floor Area (GFA) regulations further influences land prices, with a consequent reduction in saleable area by approximately 5 to 6%.
The relatively lower land price attributed to Zion Road (Parcel A) likely stems from the inclusion of long-stay serviced apartments in the tender. Given its status as a burgeoning asset class fraught with inherent risks, developers must factor these uncertainties into their bids. Segregating the long-stay serviced apartments could potentially enhance the attractiveness of both sites to prospective investors.
In the case of Zion Road, existing hotels and serviced apartments dot the vicinity, commanding premium daily rates starting from $300 (excluding taxes and GST) for serviced studio apartments. Conversely, 4 to 5-star hotel rates remain comparable or higher. These rates exceed 50% of the rental charges for 1-bedroom condos in the area. Targeting mid to premium segments, developers could position the long-stay serviced apartments to cater to transient professionals and medical tourists, given its proximity to SGH, one-north, and NUS.
As for Upper Thomson Road (Parcel B), the nearest GLS site, Lentor Central, transacted at $982 psf ppr in Sep 2023. However, with an estimated 940 units, Upper Thomson Road (Parcel B) presents a larger quantum, thereby amplifying developmental risks, which could explain the marginally lower bid.
