New project rollouts set to keep collective sales market active in 20225 things to consider when investing in a luxury property in SingaporeThe Government Land Sale (GLS) site at Tengah Gardens Avenue received three bids before its closing on Jan 14.Led by Hong Leong Holdings, the highest bid of $675 million was submitted by a consortium which includes GuocoLand Singapore and CSC Land Group. With it, the consortium is looking at a $821 per square foot per plot ratio (psf ppr).The site is zoned “Residential with Commercial at 1st Storey” and sits on a 99-year leasehold. It is approximately 273,906 square feet and can have a maximum gross floor area (GFA) of 821,720 sq ft. Urban Redevelopment Authority (URA) estimates that the site can hold up to 860 residential units if developed upon.The Hong Leong-led consortium plans to develop an 860-unit condo on the site. The main selling point for the development is the connectivity it will have to the upcoming Jurong Region Line (JRL). According to Loke Kee Yeu, the general manager (Projects) at Hong Leong Holdings Limited, the JRL’s presence will fuel the growth of the new Tengah estate.AdvertisementAdvertisementThe Hong Leong-led consortium’s bid came in one day after the close of another site tender at Dairy Farm Walk. That site only received two bids, again highlighting developers’ cautiousness in today’s market, said Leonard Tay, head of research at Knight Frank Singapore.The top bid for the Tengah Gardens Avenue site came in at just over 0.73% above the second-highest bid. The remaining bidder, local developer Sim Lian Group, offered $812 psf ppr, falling just short of the Chinese developer Kingsford Group’s bid of $815 psf ppr.Despite increased homebuyer activity in the latter part of 2024, developers’ sentiment remains cautious, according to Tay by Knight Frank Singapore. Another factor that has contributed to this is the rally of home prices in 2024, which may not be sustainable long-term. So, developers might choose to focus on the existing sites to be launched in 2025 before making any further moves into the market.Bid spreads of less than 1%However, the bid price spread between the top and bottom bids for the Tengah Gardens Avenue site was less than 1%, which could indicate that developers are more conservative in their approach, says Tay by Knight Frank Singapore.According to Mark Yip, CEO of Huttons Asia, developers are critically aware that they require reasonable land bids to keep their profit margins at a level that is attractive to buyers. This is a possible reason for the low bid price spread between the top-, second- and third-best bids.Yip also believes this year will see an increase in joint bids submitted for GLS sites by developers. In such a scenario, risk can be diversified, which could be one possible reason for the low number of bids received.If bids are made for another GLS site located nearby at Lakeside Drive and Lakeside MRT, they may see the developers looking at a different GLS site. The site is scheduled to launch its tender in April 2025.AdvertisementAdvertisementThis article was edited on the basis that the 99-year contract for this particular GLS site is still ongoing. With this context, the top bid of $821 psf ppr submitted by the Hong Leong-led consortium could result in an average selling price of around $2,000 psf, according to Ismail Gafoor, CEO of PropNex. The site is also situated within a 2km radius of the future co-educational school of Anglo-Chinese School (Primary). This could prove to be very attractive to families looking for a condo.The first private residential project at Tengah HDB township was launched in 2022. This was Copen Grand, an EC jointly developed and launched in May 2021 by City Developments Ltd (CDL) and MCL Land. It sold out within a month of its launch. With a winning bid of $400.32 million, or $603 psf ppr, the 639-unit project was the first EC site in Tengah HDB township.Recently, developers such as Hong Leong Holdings have been making forays into sites that are located in Lentor, Upper Thomson, and Bugis. Marcus Chu, the CEO of ERA, believes that the opportunity to develop the first private condo in the new Tengah estate will have been a strong lure for the Hong Leong-led consortium. He adds that the consortium might want to mirror its other ventures in these locations.Mohan Sandrasegeran, the head of research and data analytics at SRI, believes that if the site is awarded, there’s a high chance of Hong Leong Holdings delivering its 860-unit condo to the market. However, the site may not be reserved for just ECs, which may lead to a wider range of buyers being attracted to the new development. This could include buyers who’re subject to restricted ownership criteria, such as a household income ceiling of $16,000 per month, and a minimum of five years of occupation.
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Investing in a condo has numerous advantages, one of which is the opportunity to utilize the property’s value to acquire further investments. This is a commonly used tactic by investors, who leverage their condos as collateral to secure additional funding for new ventures. In turn, this can diversify their real estate portfolio and potentially increase their returns. However, it is important to note that this strategy also carries its own set of risks. As such, it is crucial for investors to have a solid financial plan in place and carefully consider the potential impact of market fluctuations on their condo investments.