SINGAPORE: A recent state land tender for a mixed-use development in Tampines Street 94 has seen strong interest from developers, largely boosted by the recent US interest rate cut, according to experts.
According to The Straits Times, on Sept 19, Hoi Hup Realty and Sunway Developments made the highest bid of $668.3 million on Thursday (Sept 19), the day after the US interest rate cut. In contrast, a long-stay serviced apartment site in Media Circle, Buona Vista, attracted only one bid of $120.1 million.
The Tampines site, located near the Tampines West MRT station, is set to offer 585 residential units and 10,500 square metres of commercial space. Six bids were submitted for this site.
Leonard Tay, head of resecarch at Knight Frank, noted that developers prefer to invest in known types of developments rather than in new concepts that have not proven themselves yet in Singapore, explaining the different outcomes for the two land sales mentioned.
Tricia Song, head of research for Southeast Asia at CBRE, linked the increased developer confidence to the US Federal Reserve’s recent interest rate cut of 50 basis points on Sept 18.
She noted that the cut may have boosted confidence in the Singapore land sales market, leading to more bids and optimistic offers than in the past ten months. She added that investment confidence is expected to grow as funding costs fall, especially if developers see more sales from lower mortgage rates.
According to Justin Quek, chief executive of OrangeTee & Tie, the bid of $668.3 million for the Tampines site translates to a land rate of $1,004 per square foot per plot ratio. This amount is just 1.9 per cent higher than the next highest bid of $655.6 million, or $985 per square foot per plot ratio.
He pointed out that this site has received the highest number of bids since November 2023, when a site in Clementi Avenue 1 had six bids.
Analysts point out that the Tampines Street 94 plot is smaller than the Government Land Sales (GLS) site in Tampines Avenue 11, which sold for about $1.2 billion in July 2023 with three bids. The smaller size made the Tampines Street 94 site more appealing to developers.
Wong Siew Ying, head of research at PropNex, noted the popularity of integrated developments. She mentioned that the significant commercial part of the Tampines project will support the growing residential community and enhance retail options in the area.
There is also strong demand for private housing in Tampines, with the recent launch of Treasure at Tampines selling out by 2022. Many residents from Housing Board flats in Tampines, Bedok, and Pasir Ris are looking to upgrade, further driving interest in this new development.
In contrast, the 60-year leasehold site in Media Circle, which could provide 520 long-stay serviced apartments and commercial space, received only one bid of $120.1 million. This bid amounts to about $461 per square foot per plot ratio, which Ms Wong found “unsurprising”, especially given the weak results for two other recent tenders for similar apartments.
Mr Quek noted that the long-stay serviced apartment model is still largely untested in Singapore. He pointed out that there are already hospitality developments in nearby Queenstown, which are closer to transport, retail, and dining options compared to the site. He added that the shorter 60-year lease may also have been a factor in the sole bid.
Despite these challenges, Mr Quek believes there is potential demand in the one-north business area, which is near the National University of Singapore and National University Hospital.
Mark Yip, chief executive of Huttons Asia, stated that while long-stay serviced apartments meet an underserved market need, the lack of developer interest shows that the market may not be ready for this type of project yet. He pointed out this is “due to higher risks of building an untested product and longer time taken to recoup capital”.
Nicholas Mak, chief research officer at Mogul.sg, suggested that the low bid for the Media Circle site could mean it might not be awarded. He noted that not many developers are keen on operating serviced apartments in that area, as the rental market remains untested.
However, Marcus Chu, CEO of ERA, thinks the sole bid meets expectations. He explained that the developer will need to follow JTC Corporation’s urban design rules, which Boustead is well-acquainted with due to its experience in industrial property development. Meanwhile, Frasers will contribute its expertise in serviced apartments. /TISG
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