Developers are no longer hungry for housing sites

MANY Singaporeans aspire to own condominiums and private home prices have been resilient. Numerous developers have capabilities in building homes and are short of residential development land bank.

Yet, the state tender of River Valley Green (Parcel A), which has a land area of 100,032 square feet (sq ft) and can generate about 380 private homes, drew only two bidders. A Wing Tai Holdings unit placed the top bid of nearly S$464 million or about S$1,325 per square foot per plot ratio for the plot next to Great World MRT station.

However, the state tender of the Upper Thomson Road (Parcel A) site, which closed at the same time, drew no bids. This marked the first time in over 20 years that a state land tender closed with zero bids.

Located next to Springleaf MRT station, the Upper Thomson Road plot is slated for the building of about 540 residential units and 100 long-stay serviced apartments, which have a minimum-stay requirement of at least three months. 

Perhaps developers are not enamoured by long-stay serviced apartments or unsure about this new asset type in suburban locations. Might the government relook having housing sites with long-stay serviced apartments or consider ways to boost developers’ appetite for housing plots?

As it is, the government has released land supply for 5,050 private homes under the H2 government land sales programme. This is similar to the land released for 5,450 units in H1 and is in line with the government’s aim to maintain the stability of land supply in the private housing market.

Separately, rents for Housing and Development Board (HDB) flats fell for the first time in May since January. Flash estimates released by SRX and 99.co showed that HDB rents dipped 0.3 per cent month on month, but were still 6.2 per cent higher year on year. 

Meanwhile, rents in the condominium market declined for the second straight month in May, down 0.5 per cent on the month from April. Compared with the same period the year before, condo rents fell 4.5 per cent. 

Still, market watchers expect good demand for HDB’s June 2024 Build-to-Order (BTO) exercise. This is the second of the three BTO launches in 2024. In June’s BTO exercise, buyers can choose from 6,938 flats across eight projects. About half of the flats offered in the latest BTO exercise have a waiting time of four years or less. 

A homebuyer looking at the premier end of the housing market may want to consider a freehold two-storey detached house on Tanglin Hill in the Ridley Park Good Class Bungalow Area, which has a land area of 15,636 sq ft and a built-up are of 8,110 sq ft. This house belonging to Hin Leong founder Lim Oon Kuin, better known as OK Lim, has been put up for sale by tender at a guide price of S$43 million.

Serving students and seniors

Singapore’s private property players are versatile. If the risks and rewards in housing projects do not stack up, groups can pivot to other property asset types.

My colleague Ry-Anne Lim reports that some property groups and asset managers here are putting more money into student housing. A shortage of supply and rapidly growing demand have fed rents and bumped up returns in purpose-built student accommodation across major markets. In stark contrast, assets such as offices have been plagued by impaired valuations and high vacancies, which have hurt returns.

Could property players here be soon clamouring to grow in the purpose-built senior living space? A rapidly ageing population in Singapore and other parts of Asia might provide rich pickings for players seeking to look after the elderly.

Nonetheless, I argue in The Level Ground that property groups may find it challenging to make a robust return from caring for seniors here as the elderly have disparate needs, the government is actively addressing many such needs, and more cost-effective senior-living options may emerge in neighbouring countries. Moreover, with the right support available, many seniors’ top preference could be to age in place in their owner-occupied conventional HDB or private home.

A more traditional non-residential property asset type is office property. Rents and capital values of prime office buildings here have performed remarkably well post Covid pandemic versus many other cities.

Still, market watchers note cracks are appearing in the rental market for prime office buildings. Rental growth in the prime Raffles Place/Marina Bay precinct eased in the first half of 2024 compared with the same period a year ago according to Knight Frank. As banks and tech firms consolidate operations in one location or downsize, office landlords may need to be more flexible on rental expectations.

Overseas

Elsewhere, UK home prices rose for a second straight month in April, according to official data, suggesting the housing market is stabilising after a dip last year.

However, US homebuilder sentiment unexpectedly declined in June to the lowest level this year as mortgage rates near 7 per cent limited prospective-buyer interest and weighed on the demand outlook.

Hong Kong’s residential rental prices recovered in May to pre-pandemic levels as mainland Chinese students and professionals flock to the city. Residential rents climbed for three straight months to reach the highest level since 2019, according to Midland Realty. Home rentals are emerging as a bright spot as much of the real estate market, including offices and residential sales, remains in a downturn.

China’s residential property market may still be struggling. Two global credit ratings firms lowered their forecasts for China’s residential sales, as an accelerating slump in home prices hampers the country’s efforts to rescue the sector.