SINGAPORE - Tenders for two state-owned plots in Bukit Timah and Hillview closed on Thursday, drawing fewer bids than expected as developers adopt a cautious approach amid economic uncertainties.
Analysts said rising interest rates and the risk of a global recession in 2023 deterred some developers, even as their land banks are running low, although the top bids for the sites came within expectations.
At the close of the tender on Thursday, the Bukit Timah Link site had drawn five bids, while Hillview Rise drew four.
Both sites are expected to yield a total of 495 private homes.
The Bukit Timah Link site attracted a top bid of about $200 million, or $1,343 per sq ft per plot ratio (psf ppr), from Bukit One, a subsidiary of Bukit Sembawang Estates.
The smaller land size translates to a lower price quantum, meaning less risk for developers, said OrangeTee & Tie chief executive Steven Tan. “A shopping mall and transport hub will be built next to this project, which will be a strong selling point for the development,” he added.
Knight Frank Singapore’s head of research Leonard Tay noted that the top bid was 15.7 per cent higher than the second-highest bid of $1,161 psf ppr, and 44.4 per cent higher than the lowest bid of $930 psf ppr.
Potential competition from an upcoming integrated project at a Jalan Anak Bukit site awarded in June 2021 could have deterred some developers from participating in the tender, he said.
“Nevertheless, the future development at Bukit Timah Link could still attract keen interest due to the transport connectivity,” he added.
“Although the pool of prospective home buyers may now be smaller as a result of the clouded economic outlook, the more palatable total of about 160 residential units would mitigate some of the development risks.”
Mr Nicholas Mak, ERA Realty’s head of research and consultancy, said the top bid had a higher land rate compared with other residential projects near the site, suggesting the developer’s confidence in its potential.
Meanwhile, Hillview Rise’s top bid of $320.77 million, or $1,024 psf ppr, was placed by Far East Civil Engineering and Sekisui House. The site can yield about 335 residential units.
Mr Marc Boey, Far East International’s executive director of property services, said on behalf of the joint venture: “We are delighted to have emerged the top bidder of the prime site at Hillview Rise. This presents an excellent opportunity for Sekisui House and Far East Organization to create another notable residential property in the Upper Bukit Timah enclave.”
He added that they will be launching The Reserve Residences, also in the Hillview area, in the first quarter of 2023.
Mr Mak said the top bid was lower than the $1,068 psf ppr land rate for nearby condominium Midwood, awarded in July 2018.
As Midwood is fully sold, this could give developers a pricing advantage, said Huttons Asia senior director of research Lee Sze Teck.
But Mr Lam Chern Woon, head of research and consulting at Edmund Tie, said developers could be concerned about the future development on the Dairy Farm Walk site, which was awarded in March at a significantly lower $980 psf ppr.
“Considering the relatively close bids for this site – the top bid was just 1.2 per cent higher than the second-highest bid – this reflects caution among developers,” he said.
Prices for the future project at Bukit Timah Link could range between $2,440 psf and $2,500 psf, given the high land rate, said Mr Mak. The project at Hillview Rise could be launched with average prices ranging from $1,930 psf to $2,000 psf, he added.
Ms Wong Siew Ying, PropNex Realty’s head of research and content, said developers’ participation was less active than expected, particularly for the Bukit Timah Link site in the city fringe.
“Despite the strong sales performance at recent new launches, the level of participation is indicative of the cautious sentiment among developers who are likely wary of the global headwinds and economic uncertainties,” she said, noting that recent property cooling measures had not significantly affected land acquisition interest.