Knight Frank Commentary Tender closing of Upper Thomson Road Parcel A & River Valley Green Parcel A

In continuation of the Government Land Sales (GLS) tenders in April 2024 where there was just one bid each for both the sites at Zion Road (Parcel A) and Upper Thomson Road (Parcel B), there were two bids for the plot at River Valley Green (Parcel A) and no bids for the site at Upper Thomson Road (Parcel A). Developers are very conscious of the selectiveness of homebuyers in the current market, and they have also become very selective in choosing sites for development. With higher-for-longer interest rates, cooling measures as well as the high costs of development that include punitive measures such as when deadlines to sell out are not met, the appetite for new development has waned. One might wonder whether GLS sites, at least some in perhaps less popular locations could be following on the heels of the collective sales market, where there are at times no bids upon tender closing?

River Valley Green (Parcel A)

The two bids and the top bid of $1,325 psf ppr at the River Valley Green (Parcel A) site is within expectations, given the continued lack of appetite from developers. At a land price of S$1,325 psf ppr, the breakeven cost could possibly range between S$2,500 psf and S$2,800 psf depending on technical, material and design considerations, with launch prices starting from S$2,900 psf. Construction considerations could also be more complex given that the irregular shape of the site, and that it almost sits on top of Great World MRT Station. With a possible average price for the project at just above S$3,000 psf when launched, this might be palatable for Singaporean homebuyers and permanent residents, for occupation and for recurring income. There should be leasing demand from foreign professionals who like the neighbourhood, with nearby amenities such as schools and retail facilities (Great World City).

Upper Thomson Road (Parcel A)

Developers showed no interest in the Upper Thomson Road (Parcel A) site, and this was slightly unexpected. The consortium that was awarded the Upper Thomson Road (Parcel B) plot in April this year was perhaps expected to put in bid for Parcel A for geographical advantage as the sites are adjacent. It is possible that the need to develop Long-Stay Serviced Apartments (SA2) in the current climate today might have deterred interest, as the Upper Thomson/Springleaf location is not typically the type of location associated with mid-term tenants. Developers could have been reticent about SA2 development as the minimum lease tenure might result in the operator competing with individual private landlords in the same development as well as the surrounding landed estate. The long-stay serviced apartment concept in the central area of the island has yet to be tested, let alone in a suburban area.