Recent launches have seen strong demand, which may stir the appetites of developers seeking suburban locations

Sep 14, 2022

Condominium developments such as Sky [email protected] and Lentor Modern are establishing new standards in Singapore's real estate market. This is occurring despite the fact that land and building prices have increased; nonetheless, purchasers do not appear to be deterred.

Recent suburban releases have achieved scorching sales despite higher loan rates, high inflation, and macroeconomic challenges. This is due to demand from HDB upgraders and owner-occupiers, as well as the limited unsold supply to pick from. As of the second quarter of 2022, there were 17,506 units of inventory that hadn't been sold.

The debut of Frasers Property's 158-unit Sky [email protected] came after a break in activity brought on by the Hungry Ghost Festival. Last week, it was able to sell 118 apartments, which is equivalent to 75% of its total units, at an average price of S$2,100 per square foot (psf). After the successful launch of AMO Residence in Ang Mo Kio earlier this year, the mixed-use property with a 99-year leasehold is the second significant new launch in the Outside Central Region (OCR) in Singapore in 2018. The 99-year AMO was a joint venture between UOL Group, Singapore Land Group, and Kheng Leong Company. In July, 366 of the 372 apartments in the development were sold at a median price of S$2,110 per square foot.

Other aspects that contribute to the desirability of these projects include the absence of any new launches in the neighbourhood, as well as their proximity to both an MRT station and schools.

When it premieres this coming Saturday, the 99-year leasehold, 605-unit Lentor Modern by GuocoLand, which is connected to the Lentor MRT station and is a component of an integrated development, is also anticipated to draw good sales (Sep 17). Prices for individual units start at S$1,880 per square foot.

GuocoLand is scheduled to unveil another project, Lentor Hills Residences at Lentor Hills Road, presumably sometime in the following year as part of a partnership that also includes Hong Leong Holdings and TID. The three individuals paid a total of S$586.6 million, or around S$1,060 psf per plot ratio, to buy the land in January (psf ppr). In July of the previous year, a purchase was made for the Lentor Modern site for a price of S$784.1 million, which is equivalent to S$1,204 psf ppr.

The analysts at DBS Group believe that good sales for Sky Eden and Lentor Modern will lead supply to drop even more, which will push average pricing upwards in the second half of 2022, albeit at a relatively slow rate.

Therefore, developers that have projects aimed at the mass market now in the works are in a strong position. The amount of money that was made from sales and the prices that were set for Sky Eden and Lentor Modern would provide developers an idea of how to price and position their own forthcoming releases.

Other OCR projects that are currently in the planning stages include City Developments: C09 -1.52% (CDL) and MCL Land's 639-unit executive condominium (EC) Copen Grand at Tengah Garden Walk in Q4 2022, and UOL and Singapore Land Group's 99-year, 520-unit residential project at Pine Grove in Q1 2023. Both of these developments are scheduled to take place in Singapore.

CDL and GuocoLand have been designated as the top selections by DBS. It was pointed out that although GuocoLand has a higher percentage of unsold inventory in comparison to the other listed developers, a strong performance when Lentor Modern begins sales ought to help reduce the gap between the two companies.

Meanwhile, high buyer interest in suburban development projects may encourage developers to place competitive bids on open space reserve land parcels available through state auctions.

Citi analyst Brandon Lee believes that the demand for Sky Eden might further whet developers' appetites for mass market projects, which would then spur competition for particular locations under the Government Land Sales (GLS) programme.

Against the backdrop of rising interest rates and an increasingly unpredictable macroeconomic climate, developers may protect themselves against the effects of a slowdown in the market by carefully picking the locations for their landbanks.