Property Unpacked: Does GLS affect property prices?
By Elizabeth Choong
/ EdgeProp Singapore |
Bayshore Road GLS site will be launched for tender in November. (Image: EdgeProp LandLens)
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SINGAPORE (EDGEPROP) - Recently, the government land sales (GLS) programme has been in the spotlight because weak market conditions have made developers more cautious in their bids for GLS sites. In February, URA announced that they would not award the Marina Gardens Crescent GLS site because the sole bid of $770.46 million ($984 psf ppr) was deemed too low. Last month, the tender for the Upper Thomson Road (Parcel A) GLS site closed without any bids. Additionally, URA announced the 2H2024 GLS programme on June 25.
How does it work?
The GLS programmes are announced twice a year, at the end of June and December. The sites on the lists will be made available for tender over the following six months. The list for non-industrial sites will be announced by URA, while the list for industrial sites will be announced by the Ministry of Trade and Industry (MTI) on their respective websites.
URA acts as the government’s sales agent for the majority of the GLS sites. However, HDB usually facilitates the land tenders for executive condos, while JTC does the same for industrial land. Details of GLS sites can be found on the websites of the relevant government bodies. Some details for each GLS site can also be found on EdgeProp’s LandLens.
When a site is made available for tender, interested developers can submit their bids to the relevant government body before the tender closing date. The developers usually have several months to prepare and submit their bids. All bids will be collected and opened by the government body on the tender closing date. They will also put up a list of all bidders and their bid prices (if it is not a price and concept revenue tender) on the same day on their respective websites.
The relevant government body will award a site via an announcement on their website. This will usually take place approximately a week after the tender closes. The site is usually awarded to the bidder who submitted the highest bid price.
Difference between confirmed and reserve lists
There are two lists under each GLS programme, namely the confirmed list and the reserve list. The sites on the confirmed list will be available for tender on the estimated launch date stated on the list.
On the other hand, the sites on the reserve list will be made available for tender only if the relevant government body receives an application from a developer. The minimum bid price committed by the developer will also be evaluated against the reserve price for the site. If the committed minimum price is deemed acceptable by the government body, they will announce the minimum bid price and the availability of the site for tender via their website. The identity of the developer who triggered the site is not made known.
Hence, the sites on the confirmed list can be deemed as definite potential supply. Furthermore, the approximate launch date for the future development on such sites can be estimated based on their tender launch date. There is more uncertainty for the sites on the reserve list because they do not have a definite tender launch date.
What is reserve price?
Essentially, the reserve price is the minimum acceptable price for each GLS site. The reserve price is pegged at 85% of the estimated market value for each site. The market value for the sites is determined by the chief valuer’s office after taking into account the proposed land use, site-specific conditions, relevant land sales as well as relevant sale and rental transactions of completed buildings.
For example, if the chief valuer’s office deems the market value for a GLS site to be $800 million, then its reserve price will be $680 million (85% of $800 million). As such, if the top bid price for the site is below $680 million, the site might not be awarded. The reserve price for each site is not made known to developers or the public.
What is a white site?
Each GLS site will have a specific land use that will be clearly stated in the tender documents. Although sites for many different uses are launched for tender via the GLS programme, residential sites tend to represent the majority of the land parcels made available for tender. Tender closings for residential sites are also the most closely watched. The next tender closing for residential GLS sites will take place later this month.
Some GLS sites are designated as white sites. This means that the successful tenderer can build a mixed-use development with complementary uses on the land parcel. Some of the permitted uses include residential, office, shop, hotel, serviced apartments, and entertainment.
The latest GLS programme has two white sites, namely Marina Gardens Crescent (see Map 1) and Woodlands Avenue 2 GLS sites. As both sites are on the reserve list, they will not be launched for tender unless they are triggered.
As mentioned earlier, the Marina Gardens Crescent site was launched for tender last year but was not awarded. The Woodlands Avenue 2 site is new to the GLS programme. Residential and commercial uses are permitted for both sites.
Source: EdgeProp LandLens
Some white sites are tendered out using the concept and price revenue tender, which is commonly known as a two-envelope tender. This means developers must submit their concept proposal and tender price separately. The government body will evaluate all concept proposals before shortlisting those that meet their criteria. The shortlisted concept proposals will then be evaluated based on tender price. This process ensures that the successful tenderer’s concept proposal aligns with the government’s vision for the site.
An example of a recent GLS site tender using the two-envelope system is the Jurong Lake District GLS site (see Map 2). The tender for the site closed in March with two bids from the same consortium of developers. At the time of writing, the site has not been awarded. Concept and price revenue tenders tend to take longer to award because more time is needed to evaluate the developers’ concept proposals.
Source: EdgeProp LandLens
The importance of GLS sites
Generally, developers in Singapore obtain development land via two methods, namely en-bloc sales and the GLS programme. This means that the government can have some control over the supply of development land by adjusting the number of GLS sites released for tender, which will then impact the number of new properties available for sale.
Savvy investors might want to examine the location of each GLS site closely because the government tends to release more sites in areas where they want to encourage development. An example is a site in Media Circle that was launched for tender in May. The tender for the site, which is slated for long-stay serviced apartments, will close in September. Additionally, there are another two residential sites along Media Circle that are on the confirmed list for the 2H2024 GLS programme. Both sites will be launched for tender in November. The tender launches of these three GLS sites aligns with government plans to build more residential developments near one-north.
A neighbourhood may experience a transformation if many GLS sites in the area are successfully awarded. Existing properties in the same area will benefit from the transformation and may even experience a boost in price. An excellent example is the award of six GLS sites near Lentor MRT Station. The new developments have drawn more attention to the neighbourhood and District 26.
Among the six awarded GLS sites, Lentor Modern is the first condo to be launched for sale in September 2022 (see Map 3). An analysis of price trends for District 26 indicates a 61.5% y-o-y surge in the average price for new 99-year leasehold condos in 2022. Additionally, the average resale price for leasehold condos also first surpassed the $1,000 psf benchmark in the same year.
Source: EdgeProp LandLens
Since 2022, the average price for new leasehold condos in District 26 has inched up by 2.4% to $2,182 psf. However, the average price for their resale counterparts increased by 25% to $1,252 psf over the same timeframe (see Chart 1).
Source: EdgeProp Market Trends (as at 2 July 2024)
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