Developers weigh costs and demand over location and attributes in bids

The shift was evident in the scant two bids for the Margaret Drive site.

Developers have moved past bidding on sites merely for their prime location and favourable attributes, now focusing on demand affordability and the increased costs involved.

The lacklustre participation at the Margaret Drive site, which drew only two bids, highlighted this shift.

"The tender outcome reflects developers’ cautious stance towards land acquisition despite the attractive attributes of the site," JLL said.

OrangeTee, for its part, said: "Whilst the site has many favourable attributes, demand affordability and higher costs remain for developers to contend with, which may have resulted in just two bidders for this land parcel."

"Moreover, there will be an Early Childhood Development Centre built on this site, which would be counted as part of the maximum permissible GFA, making the site more complex to develop," OrangeTee added.

Overall, OrangeTee said developers are cautious amidst the GFA harmonisation ruling, still-high interest rates, macroeconomic uncertainty, and elevated construction costs.

The site also drew fewer bids than the Executive Condominium (EC) site at Jalan Loyang Besar, which had four.

"Developers gravitated to the more affordable homebuyer option of an EC plot," Knight Frank commented.

Knight Frank added that the Marget Drive site tender also underscores continued cautiousness among developers after H1 2024 new home sales posted a record half-yearly low of 1,889 units.

PropNex shared a similar sentiment, saying developers remain more upbeat about the EC market compared with the private residential segment given sales in the latter have been tepid.

OrangeTee, however, underscored that given that there hadn't been a new launch in the area for quite some time, projects in Margaret Drive may enjoy HDB upgrader demand looking for a home within a familiar estate with numerous amenities, given the strong HDB resale prices in the vicinity.

JLL echoed this, saying: "The absence of new private residential projects in the immediate neighbourhood opens an opportunity for the consortium to build a new condominium to tap on demand from a potential pool of resale flat upgraders in the Queenstown housing estate."

JLL and PropNex estimate the launch prices of residential units on the site to start from $2,500 psf.

CBRE had a slightly higher prediction of $2,500 psf  – $2,600 psf.