Competition heats up on the city fringe

By Feily Sofian

/ The Edge Property |

June 3, 2016 10:16 AM SGT

Sales of units at Gem Residences trickled to just 15 in the launch weekend after a strong start that saw 300 units snapped up at its VIP preview at an average price of $1,426 psf. Despite the slowdown in sales at Gem Residences, city-fringe projects priced below $1,500 psf generally continue to be well received. On the other hand, there is a potential oversupply in Bukit Merah and Queenstown, which could create a two-tier market in the city fringe.

The pullback in take-up rate at Gem Residences is due to competition from other well-located projects. Just one week earlier, Cheung Kong Property Holdings launched Stars of Kovan. The project is located within a short walk from the Kovan MRT station. At least 66 units have been sold at an average price of $1,403 psf.

Previously launched projects are also vying for buyers’ attention. Despite the stiff competition, demand has been steady for city-fringe projects that are attractively priced.

In the first three weeks of May, MCC Land moved 34 units at The Poiz Residences at an average price of $1,389 psf. The project is located right next to the Potong Pasir MRT station. The take-up rate was consistent across unit types. The latest sales tally was based on URA caveat records as at May 30, which includes transactions up to the third week of May.

Trailing closely was Botanique at Bartley, with 32 units sold in the first three weeks of May at an average price of $1,298 psf. Two-bedroom units measuring 657 sq ft accounted for close to 60% of the transactions in May. The project is located less than 300m from the Bartley MRT station.

MCC Land sold 34 units at The Poiz Residences in the first three weeks of May

Thirty two units at Botanique at Bartley found buyers in the first three weeks of May

Separately, GuocoLand sold 23 units at Sims Urban Oasis at an average price of $1,431 psf, with one-bedroom units accounting for half of the transactions. Sims Urban Oasis is within walking distance of the Aljunied MRT station.

The initial strong sales at Gem Residences has also been attributed to the lack of new launches in the area. Similarly, Sturdee Residences sold an additional 22 units in the first three weeks of May at an average price of $1,629 psf. The latest tally brings the take-up rate to 148 of the 305 units available in the project, or nearly 50%, since it was launched last month. The area has not seen a major property launch since City Square Residences 11 years ago. Over in Tiong Bahru, Keppel Land is understood to have released a new batch of units at Highline Residences in April and sold 24 units in the first three weeks of May. Prices averaged $1,765 psf.

Looming oversupply in Bukit Merah and Queenstown

On the other hand, Bukit Merah occupies the top spot in terms of unsold stock for private non-landed homes. There are currently more than 1,400 unsold units in the area. Adjacent to Bukit Merah, Queenstown adds 570 unsold units.

Among the major projects in the area, Principal Garden saw the fastest take-up rate this year, averaging 12 units a month, owing to its competitive pricing relative to other new launches in its vicinity. Fifteen units were sold in the first three weeks of May at an average price of $1,631 psf.

In addition, two more projects could be launched in Bukit Merah and Queenstown in 2H2016. HY Realty could launch its condominium development on Dundee Road next to the Queenstown MRT station. The developer paid $871 psf per plot ratio for the site, on a par with the price fetched by the Commonwealth Towers site at $883 psf ppr. Although the site was 6% pricier than the Principal Garden site, both projects could be priced similarly, given the large unsold inventory in the area. The site can yield an estimated 645 housing units.

Separately, Tang Group could be launching its mixed-use project next to the Redhill MRT station. The developer was awarded the site last November upon submitting the highest bid of $851 psf ppr.

Although the site was 3% pricier than the Principal Garden site, it includes a commercial component with a gross floor area of at least 19,375 sq ft. At least 10,764 sq ft must be set aside for a supermarket. As such, the project could offer the most competitive price tag in Bukit Merah and Queenstown. About 400 housing units can be built on the site.

Fewer options for cheaper projects on city fringe

There will be fewer options, however, for city fringe projects near an MRT station that are priced below $1,500 psf, going by the current sales rate for existing projects and list of sites sold on the Government Land Sales programme.

The next available option would be the Shunfu Ville site, which was sold en bloc to Qingjian Realty in May. The site fetched $747 psf ppr, including the premium paid to top up the lease to 99 years, similar to the Gem Residences site, which sold for $755 psf ppr. The former is larger, however, and can be redeveloped into a private condo with more than 1,000 units. The earliest likely launch date is in 2Q2017.

The other option would be the parcel on Lorong Lew Lian, which is located some 400m from the Serangoon MRT station but falls slightly outside the official city-fringe boundary. Awarded in November 2015, the project can be launched in 2H2016 and yield an estimated 465 units. Based on the land price of $710 psf ppr, the selling price is estimated to range between $1,350 and $1,450 psf.

Price differences lead to a two-tier market on the city fringe.