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Key Factors Contributing to the Zero Bid on Upper Thomson Road Housing

July 1, 2024

The tender for a Government Land Sales (GLS) site at Upper Thomson in District 26, Singapore closed on 19th June 2024 without any bids, marking a rare occurrence in over 20 years. The site, designated for residential with commercial at first storey and serviced apartments, received no interest from developers despite its location near the Springleaf MRT station and the robust demand for private housing in the OCR.12. 

This absence of interest might appear incongruent with the prevailing market dynamics. 

Although the demand for private housing in the Outside Central Region (OCR) has remained robust (primarily driven by upgraders), properties in the Rest of Central Region (RCR) and Central Region (CCR) target a more specialised market segment, with certain developments aimed at attracting foreign investors.

Our proprietary data from DataSense indicates a slight 1.7% year-on-year decrease in demand for non-landed Private Residential homes in the OCR as of May 2024. This contrasts sharply with a more significant drop in the RCR (-11.6%) and the CCR (-12.5%). Interestingly, the GLS site in question is located near the Springleaf MRT station on the Thomson-East Coast Line, which further adds to its marketability.

Figure 1: Demand Index for Non-Landed Residential Homes by Planning Region

Source: DataSense by PropertyGuru For Business

Note: The Demand Index is derived from the visitors of the listings, weighted by how they interact with the listings. 

Do Serviced Apartments II (SA2) pose a challenge?

According to the URA technical conditions, the land parcel in Upper Thomson is designated for Residential with Commercial at first-storey development. The site area for the land parcel was about 24,421.9 metres square, which amounted to a maximum gross floor area of 53,729 metres square. 

A minimum GFA of 43,700 sq metre of the overall gross floor area needed to be set aside for Serviced Apartments II use (SA2). These SA2 units are required to be located on the upper floors of the Low-Rise Zone of the development; the average unit size is at least 35 square metres, and each unit should have its own attached bathroom and at least 25 metres square. All residents residing within the SA2 units must fulfil a minimum stay duration of 3 months.

Analysts, as reported by Business Times[1], suggest that the stipulated long-stay serviced apartments contributed to the lack of bids. Meanwhile, the rental market in District 26 has shown signs of resilience. In Q1 2024, the number of non-landed rental agreements rose to 104, up from 77 in the same quarter of the previous year. Despite this increase, the average monthly rent for properties between 1,000-1,100 sq ft has continued to climb post-social distancing measures.

The number of non-landed rental contracts signed in District 26 rebounded in Q1 2024 to 104 contracts from 77 in Q1 2023. Historically, the last peak of the number of rental contracts signed was in Q4 2021, coinciding with the rise in demand from Singaporean households who are waiting for the homes to be completed. Of the 104 contracts signed, more than half of the contracts signed were for non-landed homes with floor area spanning 800 sq ft to 1,300 sq ft.  

Figure 2: Number of rental contracts signed in District 26 for non-landed residential projects

Source: REALIS, DataSense by PropertyGuru For Business

Figure 3: Average Monthly Rent for a 1,000 to 110 sq ft

Source: REALIS, DataSense by PropertyGuru For Business

This divergence between rental prices and contract signings indicates a mismatch in market expectations. Additionally, the Demand and Supply Indices from DataSense reveal lower renter interest and a heightened level of supply of listings to rent.

Figure 4: Supply and Demand Index for non-landed homes to rent in District 26

Source: DataSense by Propertyguru For Business

Notwithstanding, the rental pressure will likely increase with the upcoming developments in the area. As of Q1 2024, there were 3,038 units of homes in the pipeline supply (See list of developments), excluding the other site at Springfield that was recently awarded.

Figure 5: Notable Non-Landed Residential Developments Supply in District 26

Source: REALIS, DataSense by PropertyGuru For Business

Given that it is difficult to gauge the demand for SA2 use at Springleaf, Upper Thomson amid uncertain global economic conditions, developers may have been discouraged from bidding for the site.

What could be the game changer that makes SA2 work in the area?

While the existing market conditions may not be unfavourable at the moment, there are a number of things that may change in its favour. This leads to the question: What could potentially make SA2 viable in the Upper Thomson area? 

The Johor Bahru-Singapore Rapid Transit System (RTS) Link, set to commence in January 2027, is expected to alleviate at least 35% of traffic at the Causeway, potentially attracting Malaysian professionals to work in Singapore. It may catalyse the Northern Economic Gateway, driving the rental market.

Springleaf New Town’s promise of green living, connectivity, and emerging job opportunities positions it as a potentially appealing locale for both nature enthusiasts and professionals. However, the initial reluctance at the GLS site could stem from uncertainties surrounding the SA2 designation in Upper Thomson, which might depend on broader regional development and acceptance of the new housing model.

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[1] No bids for Upper Thomson Road housing site at URA tender (businesstimes.com.sg)

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