URA awards Zion Road, Upper Thomson sites to sole bidders at lower-than-expected offers

The Urban Redevelopment Authority (URA) has awarded the two large sites put up for sale at Zion Road and Upper Thomson Road, after tenders closed on Apr 4 with single bids at lower-than-expected offers.

Zion Road (Parcel A) was awarded to a City Developments Limited-Mitsui Fudosan tie-up at its bid of S$1.1 billion or S$1,202 per square foot (psf) of gross floor area. The site is the first to be released for sale in the government’s pilot project for long-stay serviced apartments, a new rental category designed to address a supply crunch that sent housing rents shooting up in the last few years.

The Upper Thomson Road (Parcel B) plot went to a GuocoLand-Hong Leong group joint venture at its bid of S$779.6 million or S$905 psf of gross floor area. The parcel is near a new cluster of private housing projects coming up in the Lentor Hills precinct, where six plots have been sold so far and five projects launched. 

Market watchers had speculated at the close of the tenders two weeks ago that the Zion Road parcel might not be awarded. The sole bid had come in some 30 per cent lower than the most recent comparable site sold nearby.

In February, the sole bid for a Marina South area parcel for 775 units was rejected by the URA for being “too low”, the government agency said. The nearly S$770.5 million bid, or S$984 psf ppr (per square foot per plot ratio), was almost 30 per cent lower than a nearby, similar-sized plot sold last year.  

Tricia Song, CBRE’s head of research for Singapore and South-east Asia, said the acceptance of the single lower-than-expected bid for the Zion Road plot “is a recognition that the market conditions have changed over the past five to six years since the neighbouring site has been awarded”.

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The climate has changed with sharply increased Additional Buyer’s Stamp Duty (ABSD) eroding demand, and higher construction and financing costs squeezing margins. The site on offer also carried a higher risk premium with its long-stay serviced apartment component, a new asset class, said Song. 

“This is a positive signal to developers to challenge new frontiers amid headwinds,” she said.

The tender outcome also reflects how the government “has to balance optimising land sales proceeds and pushing out new housing supply to stabilise private home prices”, said Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and South-east Asia.

Analysts had earlier pointed to deteriorating sentiment among developers, with players turning more risk-averse as data shows slowing demand. Prime projects in the central region, in particular, have taken a hit from higher stamp duties imposed on foreign purchasers and investment buyers since April 2023.

URA data indicates that overall private home prices rose 1.5 per cent in the first quarter, slowing from their 2.8 per cent increase in the quarter before.

Alan Cheong, executive director of research at Savills Singapore, said: “It would set a bad precedent if the sites were not awarded. If they stop awarding the tenders, future supply will be crimped and prices may accelerate up. The market has shown that there is a bit of indigestion going forward.”

Alice Tan, head of consultancy at Knight Frank Singapore, pointed to the large ticket size of those sites and elevated costs of borrowing, and the government wanting to kick-start development of the new serviced apartment pilot.  

Also, “the government may be taking a view of the site’s significance as a litmus test for end-user market demand of long-stay apartments before potentially scaling up in future sites”, said Cushman’s Wong.

At 15,277.9 square metres (sq m), the Zion Road site can yield up to 1,170 residential units, including 435 serviced apartments in a coveted location on the edge of the prime River Valley residential neighbourhood.

The Upper Thomson Road (Parcel B) plot spans 32,023.7 sq m and can yield 940 units. The GuocoLand-Hong Leong bid came in about 8 per cent lower than the most recently sold plot in nearby Lentor Hills.

In a statement sent last night, GuocoLand, which is building two projects in the Lentor area, said: “We are excited to have the opportunity to uplift another new neighbourhood at Springleaf through our placemaking capabilities.” 

CBRE’s Song expects project prices to be pegged to market prices at the time of launch, and not led lower by lower land costs.

“Conversely, the developers have more margin headroom to create a quality differentiated product to attract demand at affordable price points, and to clear inventory within the ABSD timeline.”

Developers have five years from the time they acquire a site to sell 90 per cent of units in the project, or face a hefty ABSD payment on the land price.