Developers remain cautious in bids for Orchard Boulevard, Tengah EC sites

The upcoming Orchard project could sell for $3,000 psf.

The state land tenders for a luxury residential site on Orchard Boulevard and an executive condominium (EC) plot in Tengah’s Plantation Close that closed late last week marked another sign developers are still coping with rising development risks and muted foreign demand, according to analysts.

Leonard Tay head of research at Knight Frank, said the tender for the Orchard Boulevard site reflects the heightened development risks companies are facing while the demand from their key market, foreign homebuyers, has been dampened by the increased ABSD rates.

The top bid submitted by a joint venture between UOL and SingLand of $428m translates to a land unit rate of S$1,617 psf per plot ratio (ppr), a land rate falling within Knight Frank’s expectations but still 32% below the price paid for the actual price pair for the nearby Cuscaden Road site (the present Cuscaden Reserve project) in 2018.

Wong Siew Ying, head of research and content at PropNex Realty, shared the same view, noting that “the tight bid-price spread across the four bids reflects the cautiousness among developers.”

While the hiked ABSD rate already weighed on foreigners’ appetite to shop for luxury homes in the prime areas, Wong said the winning developers can still tap into the local market to drive home sales. 

READ MORE: UOL-SingLand JV tops bidding for Orchard Boulevard site

Tay expects developers to sell units in the upcoming Orchard Boulevard project for around $2,500 to $2,700 per square foot to break even, although launch prices could still hit the $3,000 psf mark.

Also on Thursday, the tender for the Plantation Close EC site in Tengah closed with four bids, led by the winning bid of Hoi Hup Realty and Sunway Developments at $423.4m or $703 psf ppr winning bid. 

The tender’s results failed to meet the initial estimates of some analysts like CBRE Tricia Song, CBRE head of Research, Singapore and Southeast Asia, although she said the firm pricing during the tender reflects developers’ continued confidence in the EC market.

“The segment is generally not as affected by the recent property cooling measures due to the higher proportion of owner-occupiers and first-time buyers… There is also a limited supply of new EC units in the market, and developers are seeking a less risky development site,” she added.

OrangeTee & Tie CEO Justin Quek said there is also a growing demand for ECs among HDB owners who want to upgrade to an affordable private home.

“Developers may have been keen to tap on the HDB upgrader demand,” he said.

READ MORE: Plantation Close site attracts 4 bids