What's driving the aggressive bids for the Tanah Merah and Yishun GLS sites?

Given the current Covid-19 crisis, you’d think developers would want to play it safe. After all, who would dare to make aggressive bids for Government Land Sales (GLS) sites, when we don’t know how the market will look a year from now?

The answer, apparently, is quite a few developers. Two land parcels – at Tanah Merah Kechil Link and Yishun Avenue 9 – drew unexpectedly strong responses.

The Tanah Merah GLS site drew 15 bids, with the winner (MCC Land) putting down around $249 million (approx. $930 psf ppr for the 8,880 sqm site. This is the highest number of bids for a residential site since May 2018.

Meanwhile, the Yishun GLS site drew seven bids, and was won by Sing Holdings for around $373.5 million (about $576 psf ppr for the 21,514 sqm site).

But what makes developers so confident of these sites, when the Covid-19 downturn has hardly shown an end in sight as of yet?

Let’s have a look at both these GLS sites.

The Tanah Merah GLS site

This GLS site is located between Tanah Merah Kechil road on one side, and New Upper Changi Road on the other. This places it just across from Tanah Merah MRT station, on the East-West line.

Now, this is not an area devoid of condos – Optima @ Tanah Merah, Urban Vista, and the upcoming Grandeur Park Residences (est. TOP in 2021) are all nearby as well; Optima is just 190 metres (three minutes) walk next to the MRT accessible via a side gate, while Grandeur Park Residences is 350 metres (four minute) away.

Grandeur Park Residences is on the opposite side of the station from the site. Urban Vista is the furthest, at 550 metres (seven minutes) away.

Urban Vista is also right beside the MRT station given its side gate opens right out Upper Changi Road.

Having so many alternatives would provide competition, especially with the large Grandeur Park Residences having 722 units.

However, there are two key factors for this GLS site, that make it a prime spot:

First, Tanah Merah MRT means fast access to the airport

Tanah Merah interchange is also where you can get on the MRT station to the Singapore Expo, and then on to Changi airport; it’s only about two MRT stops.

As such, any condos close to Tanah Merah MRT are bound to be a first choice for aviation industry workers (of course, when things pick up again in the future).

It’s also popular among families who see the airport as a food / shopping amenity – because with the opening of the Changi Jewel, catching a plane is no longer the sole reason Singaporeans go to the airport.

Second, this new GLS site will allow for commercial development

One of the drawbacks of Tanah Merah is that it is, for the most part, boring. There are few things to do in the immediate area; particularly around the Tanah Merah MRT station (which has nothing besides an ATM and a small 7-11).

Even Grandeur Park Residences, the newest upcoming development here, has just two shops.

The new site, however, allows for about 21,528 sq. ft. of retail space on the ground floor; it’s expected that we’ll see around 265 units above this commercial space.

While this isn’t amazingly huge, it will hopefully provide some much needed food and retail amenities to the area; perhaps even a supermarket if the residents are lucky.

(With three other condos nearby, and no competitor, we think any supermarket here is bound to hit the jackpot).

This is also a stroke of good fortune for owners of Optima @ Tanah Merah, Grandeur Park Residences, and Urban Vista; it rectifies one of the key things the area is lacking.

What are prices likely to be for future developments?

We took a look at nearest surrounding condo developments, to get a sense of the pricing.

Grandeur Park Residences:

Grandeur Park Residences is expected to be completed by 2021. At the time we’re writing this, there are only two units left unsold.

The last known prices at Grandeur Park Residences were about $1,551 psf, with the average quantum being about $1,587,945. It’s also worth noting at this point that there have been 5 sub sale transactions so far – with every single one being profitable.

Urban Vista

Urban Vista is a relatively new condo, having just been completed in 2016.

The last recorded prices averaged $1,247 psf, with an average quantum of $1.06 million. This one has been a much poorer performer thus far, with a total of 7 profitable and 30 unprofitable transactions.

Optima @ Tanah Merah

Optima @ Tanah Merah was completed in 2012, and is the oldest of the three here.

The last recorded transactions have averaged $1,215 psf, with an average quantum of $850,000. There have been a total of 153 profitable and 9 unprofitable transactions so far.

New launch condos are always priced higher than older counterparts, so we should expect the upcoming development to be priced higher than Grandeur Park Residences.

In addition to being newer, the attached commercial space can also justify a higher price. Based on the current land sale price, however, the developers will have to be selling at a price point of $1,700 to $1,800 psf.

The Yishun Avenue 9 GLS site

This site is an Executive Condominium (EC) site, located at the intersection of Yishun Avenue 8 and 9, next to the Symphony Suites condo. Apart from Nine Residences, located about 600 metres away, the other residential properties here are HDB flats.

Like many other EC sites, it’s quite far from the MRT station – roughly 1.6 km. However, it is within 700 metres (nine minutes’ walk) of the Junction 9 shopping mall. This is the first EC launch in Yishun in 2015, the last being The Signature and The Criterion.

The Yishun site is quite large, and it’s expected that it can yield about 600 homes. It’s also expected to have a good view of the Khatib Bongsu nature park, once NParks completes it.

The advantage of the Yishun site…is that it’s an EC site

Developers have always been confident about ECs, because these are some of the more in-demand property types . ECs are a cross between public and private housing; they are only HDB properties for the first 10 years, and are fully private after that.

ECs are often said to “make money” immediately after the five-year Minimum Occupation Period (MOP). Some believe prospective buyers are easy to find for resale ECs – only the first batch of buyers are faced with the MOP, and the theory is that any buyers would be purchasing closer to the date of full privatisation.

Sing Holdings paid an eyebrow-raising $576 psf for this site. For reference, the most expensive EC site so far was Sumang Walk (now Piermont Grand) at $583 psf in 2018.

What’s the likely price in this area?

We take a look at the two nearest condos. Symphony Suites and Nine Residences:

Symphony Suites

This condo is located right next to the upcoming EC. Symphony Suites is a very new condo, just completed in 2019.

Based on the last few transactions, prices averaged $1,050 psf. Average prices were around $723,000. There has been a total of 12 profitable transactions, with 0 unprofitable transactions so far.

Nine Residences

Nine Residences is a small development (186 units), that’s also quite new; it was completed in 2017. Market watchers may remember its unique selling point: it’s within a five to six-minute walk of Northland Secondary, Yishun Town Secondary, and Xishan Primary school.

The last recorded transactions showed prices of around $932 psf, with average overall prices of $863,600. So far, there has been 10 profitable and 3 unprofitable transactions.

Given that the upcoming development is an EC, it definitely won’t be priced as high as a fully private new launch condo. Given that their likely breakeven is around $1,000 psf, prices should be looking at something above $1,100 psf.

These new GLS sites could see launches by 2021 or 2022…will they be worth waiting for?

With regard to the Tanah Merah site, it definitely has good prospects thanks to (1) being across from an MRT, and (2) being on top of the only real retail / food outlets in the immediate vicinity.

At only around 265 units, we think there could be reasonably good demand.

It’s too bad that Covid-19 threatens to diminish the number of foreign numbers, or investors would likely jump in for the potential rental income; it caters well to aviation industry tenants.

For the Yishun site, it seems a little less exciting due to its distance from the MRT and Northpoint mall; but there will probably be a shuttle service. However, ECs have drawn eager buyers even with less accessible locations (e.g. Piermont Grand).

Follow us on Stacked, and we can keep you updated as the situation progresses. You can also check out in-depth reviews of condos around the area; you may want to familiarise yourself with alternatives before the new developments are up.

This article was first published in Stackedhomes.