City Developments, Mitsui Fudosan jointly bid $1.1 billion on the Zion Road plot, equating to $1,202 per square ft, per plot ratio. This is 30 percent lower than Frasers Property’s winning $955.4 million bid or $1,733 sq ft/per plot ratio for the Jiak Kim Street, adjacent to the Riviere’s current location.

Upper Thomson Road won a bid of $779.6m from a Joint Venture between GuocoLand Holdings and Intrepid Investments. That’s a rate of $905/sf ppr.

While the price was a bit below expectations it reflects on the size of this plot and the current market.

The two tenders reflect the authorities’ awareness that market conditions, with higher development costs as well as a decline in new home purchases, have become more challenging.

The government needs to find a balance in optimising the proceeds of land sales while pushing out new housing to stabilize private home price.

Zion Road is a unique asset class, for which no clear market value has been established.

It’s important to note that the awarding of this site’s contract is crucial, as it shows comparable land sales for the use of these apartments, and will also provide evidence, over time, of their long-term performance, once they are completed.

It’s significant that a 12-day gap existed between the close of both tenders and their awards,” he added.

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This may indicate that internal discussions were held to determine whether the estimated values took into consideration the fact the developers would price the apartments for long-term use in relation to the cash flow of long-term renting, rather than making a direct comparative with GLS sites that are residential, where these units are sold.

GLS locations are typically awarded within one or two days of a tender closing if several bidders participate and the bids either exceed or match the Government’s Reserve Price, which is set up by the Chief Assessor.

Analysts state that pricing for newly launched units is based on current market pricing. Break-even for the Zion Road could range from $2400 to $2600 per sq ft, at $1,202/sq ft ppr. Prices would start at $2700.

The Upper Thomson Road site’s land rate at $905 psf will likely translate into a launch price that is just under $2000 psf.

In an unexpected twist, authorities accepted on April 16 the only bids received for two Government Land Sales locations in Zion Road (ZIL) and Upper Thomson Road. Analysts had anticipated that these bids, which were lower than expected by the market, would be rejected.

According to some, the authorities probably priced in both sites’ unique features, adding complexity and cost of land development. They may have justified the bids at the close-out tender on April 4.

The Upper Thomson Road site parcel B will be used for high-rise apartments in Springleaf. Springleaf consists of a low rise, low density area.

Analysts point out that the two applications haven’t been tested.

The government might have considered that the prices for the tenders were reasonable when compared to the risks taken by these developers.

Upper Thomson Road includes a conservation aspect that forms part of saleable gross floor space, and different height zones in the same plot.

Developers must use a new financial model to invest in the Zion Road Long-Stay Serviced Apartments. Comparing the bid on this site to those of recent land sales or other nearby sites can be less effective as a pricing guide.