Tenders closing for URA sale sites at Canberra Crescent, De Souza Avenue and Zion Road (Parcel B)

SINGAPORE, July 18, 2024 – Tender closed today for two Government Land Sales (GLS) sites at Canberra Crescent, De Souza Avenue and Zion Road (Parcel B).

^{* A minimum GFA of 600 sqm and 500 sqm for childcare centre is stipulated for the Canberra Crescent and De Souza Avenue sites, respectively.}
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:

Despite still-low levels of unsold housing inventory, the subdued land tender participation and measured bids from developers reflect that they continue to approach land acquisition with caution. The conservative stance observed since 2H23 to reduce capital expenditure and mitigate development risks stems from concerns about high financing costs, tight profit margins and slowing buyer demand.

Primary market sales have slowed and declined to a 15-year low of 6,421 units in 2023 due to cost-consciousness among buyers, a sluggish economy and elevated interest rates. The cautious sentiment among buyers resulted in a developer sales tally of 1,916 units in 1H24, down 43.4% from 3,383 units sold in 1H23 and 54.6% lower than the 4,222 units sold in the same period in 2022.

Canberra Crescent

Out of the three sites, the Canberra Crescent site attracted the highest number of bids. However, the three bids received remain below the average number of contenders for residential sites in 2023.

The Canberra Crescent site, which can yield 375 home units, can potentially tap on the upgraders’ market from the surrounding Sembawang, Yishun and Woodlands public housing estates. Limited competition from new private homes supply in the area also motivated developers to bid for this site.

The top bid of $793 psf ppr for the subject site is conservative amid current market conditions. However, this is 23.1% and 21.9% higher than the $644 psf ppr and $650 psf ppr attained by the sites at Canberra Drive Parcels A and B, respectively in March 2020.

The next highest bid for the subject site is just 1.4% lower but compared to the lowest bid, the price gap is 22.0%. This shows the disparity in outlook among the developers and the measured bids also display their reduced risk appetite and opportunistic approach given the more challenging market environment characterised by elevated costs, increased risks, and a slowdown in new home sales.

At a land cost of $793 psf ppr, launch price of residential units on the subject site could start from $1,700 psf and the breakeven cost is estimated at about $1,500 - $1,600 psf, depending on technical, material and design considerations.

De Souza Avenue

The De Souza Avenue area has a limited supply of new homes supply. Existing projects such as The Linq @ Beauty World and Verdale have been completely sold out. The Reserve Residences, with only 39 unsold units out of 732 (as per the developer sales status in June 2024), accentuates demand for new housing units in the vicinity.

The highest bid of $841 psf ppr for the subject site is 22.3% higher than the next bid. However, it is 37.4% below the $1,343 psf ppr achieved by the Bukit Timah Link site in November 2022.

The requirement to reposition the pedestrian crossing on Jalan Jurong Kechil, create new bike lanes and walkways along Old Jurong Road and Jalan Jurong Kechil, and expand a pedestrian crossing at the intersection would raise development outlay. This likely impacted on the contenders’ bid price threshold.

Hence, both offers for the subject are below market expectations and portray developers’ continued cautious outlook towards land banking.

While lower land prices may seem to suggest reduced selling prices for future launches, developers must contend with various factors such as development costs, risks, and lower profit margins. As a result, the pricing of newly launched units will remain aligned with the prevailing market prices at the time of their release.

Zion Road (Parcel B)

The tepid interest in the site can be attributed to concerns about the potential competing supply of new private residential units that will be generated from recently awarded GLS sites in the locale.

An abundance of about 2,740 new private homes units (including long-stay serviced apartments) can be developed from Zion Road (Parcel A) and River Valley Green (Parcels A and B). Another 470 units could be added should the River Valley Green (Parcel C) plot on the Reserve List be triggered for tender.

Other developers may be deterred by the probable defensive move by the City Development Limited-led consortium that secured Zion Road (Parcel A) to bid for Parcel B.

The requirement to include a pedestrian side gate and covered walkway to link the future development on the site to the future covered linkway along Kim Seng Road as well as to design and construct a public park will add to overall development costs. This have impacted on tender bid prices.

The top bid of $1,304 psf ppr is 10.5% higher than the next highest offer and shows the divergence in outlook and risk appetite between the two bidders. At $1,304 psf ppr, the bid is also just 1.6% below the $1,325 psf ppr achieved by the nearby River Valley Green (Parcel A) plot in June 2024.

The launch price for residential units on the subject site could start at $2,800 psf, and depending on technical, material, and design factors, the breakeven cost is estimated to be between $2,300 and $2,500 psf.