The Tang Plaza, left, and the Ion Orchard mall, right, on Orchard Road in Singapore, on Saturday, ... [+]
The Urban Redevelopment Authority has accepted the low bids submitted by joint ventures backed by billionaire Kwek Leng Beng’s City Developments Ltd. (CDL) and his cousin Quek Leng Chan’s GuocoLand for two prime residential sites in Singapore amid softening housing demand in the city-state.
“The sole bid for each parcel could have been due to the fairly large quantums for both,” Alice Tan, head of consultancy at Knight Frank Singapore said by email. “Perhaps the government’s decision to award could have taken into cognizance the full bundle of risks that comprise the large ticket size of these sites, high construction costs, elevated costs of borrowing and the government cooling measures.”
CDL and its partner, Japanese real estate giant Mitsui Fudosan, had earlier this month offered S$1.1 billion ($733 million) for a 15,278 square meter site on Zion Road, near the Orchard Road shopping district. The partners plan to build 740 housing units across a 69-story and a 64-story residential block with retail podium and a 35-story tower with 290 serviced apartment rental units, according to City Developments.
While the consortium’s bid—equivalent to S$1,202 per square foot per plot ratio—was 30% lower than a nearby land parcel, which were sold for about S$1,733 per square foot of buildable space in 2017, URA likely accepted the bid “in recognition that market conditions have changed over the past 5-6 years,” Tricia Song, head of research for Southeast Asia at CBRE, said in a research note
Housing demand has slowed in recent months after the government imposed property curbs that included a hefty tax on foreign buyers. Despite slowing property sales, the Zion Road residential projects would likely attract local buyers, Knight Frank’s Tan said.
“Considering the scale of the residential component and with a possible average price for the project at about S$3,000 per square foot when launched, this price range might just prove, not only palatable, but attractive for Singaporean homebuyers and permanent residents, whether for occupation or investment, and therefore be a compelling project in a prime area that is close to Orchard Road and the Downtown Core,” Tan said.
Separately, GuocoLand—controlled by Malaysian billionaire Quek Leng Chan—and partner Hong Leong Holdings submitted a winning bid of S$780 million for another residential site in Upper Thomson Road, about 15 kilometers north of Zion Road. About 940 residential units can be built on the 32,024 square meter plot.
“While the unit pricing was slightly below expectations, it is reflective of the plot’s large size and the current competitive landscape,” CBRE’s Song said. “Hence, it is unsurprising that the site was awarded.”
