URA awards Zion Road, Upper Thomson sites to sole bidders at lower-than-expected offers
The Urban Redevelopment Authority (URA) has awarded the sole bidders for the large sites on Zion Road and Upper Thomson Road, following the closure of tenders on April 4, where single bids were submitted at prices lower than expected.
Zion Road’s Parcel A was secured by a collaboration between City Developments Limited (CDL) and Mitsui Fudosan at a bid of S$1.1 billion, equivalent to S$1,202 per square foot (psf) of gross floor area. This site marks the government’s inaugural project for long-stay serviced apartments, aimed at addressing the housing rent surge in recent years due to supply constraints.
On the other hand, the Upper Thomson Road’s Parcel B was won by a joint venture between GuocoLand and Hong Leong Group for S$779.6 million, or S$905 psf of gross floor area. Positioned near the emerging Lentor Hills precinct, where private housing projects are burgeoning, this parcel aligns with ongoing developments in the area.
Initially, market observers speculated that the Zion Road site might not be awarded, considering the single bid was approximately 30% lower than recent comparable sales nearby. In February, a similar scenario unfolded when a bid for a Marina South area parcel was rejected for being deemed “too low” by the URA.
Tricia Song from CBRE noted that the acceptance of the lower-than-expected bid for the Zion Road plot signifies an acknowledgment of shifting market dynamics over the past few years. Factors such as increased Additional Buyer’s Stamp Duty (ABSD), rising construction costs, and the introduction of a new asset class, the long-stay serviced apartment component, influenced the decision.
Wong Xian Yang from Cushman & Wakefield highlighted the delicate balance between optimizing land sales proceeds and stimulating housing supply to stabilize private home prices, which the tender outcome reflects.
With sentiment among developers showing signs of caution due to slowing demand and policy changes, the government’s move to push forward with these developments signals a commitment to sustaining market activity. Alan Cheong from Savills Singapore cautioned against not awarding tenders, as it could potentially constrain future supply and lead to price escalations.
Given the significant size of these sites and the current economic landscape, the government’s decision to kick-start development, particularly of the new serviced apartment pilot, underscores strategic considerations for future urban planning.
Moving forward, developers have a five-year timeline to sell 90% of units in their projects or face hefty ABSD payments on the land price. This period offers both challenges and opportunities for developers to navigate market conditions while meeting regulatory requirements.
