Chencharu Close GLS site, A Less Risky Development Project for Developers
Written by Nicholas Mak
Thursday, 26 September 2024
Summary
(1) The government is offering a residential-and-commercial development site at Chencharu Close for sale. About 875 private apartment units can be built above the retail mall, which will make this development the second largest private residential project in Yishun.
(2) This GLS tender could attract up to 8 bids from real estate developers. This relatively high number of bids should not be mistaken as a sign that developers are regaining their confidence in the land sale market. Instead, it is another manifestation of their risk aversion.
(3) Chencharu is an extension of Yishun town. Around 10,000 new homes would be built at Chencharu by 2040, of which at least 80% will be set aside for public housing. The first BTO project at Chencharu was launched in June this year and it was well-received by homebuyers, garnering a subscription rate of 3.82 times.
Introduction
The Singapore government offers for sale a 99-year leasehold land parcel at Chencharu Close, in the Yishun town. The site zoned for a joint residential and commercial development. The Government Land Sale (GLS) tender opens today and will close on 22 May 2025.
Description of land parcel Chencharu Close site
The Chencharu Close site measures 316,997 square feet (sq ft) and it can yield a maximum Gross Floor Area (GFA) of 1,033,410 sq ft. The site is planned for a mixed residential and commercial development that will be integrated with a bus interchange and a hawker centre. The site is located about 500 metres of a 5 to 7-minute walk from the Khatib MRT Station.
About 875 private apartment units can be built above the retail mall, which will make this development the second largest private residential project in Yishun. The 920-unit North Park Residences is the currently biggest private residential project in Yishun. The retail space is likely to be used for a shopping mall with a supermarket.
About Chencharu
Chencharu is an extension of Yishun town. The government plans around 10,000 new homes to be built at Chencharu by 2040, of which at least 80% will be set aside for public housing.
The first BTO project at Chencharu was launched in June this year. Although Chencharu is a new housing estate, the BTO project named Chencharu Hills was popular with HBD homebuyers. Chencharu Hills attracted an over-subscription application rate of 3.82 times from BTO applicants, which is higher than the overall 3.32 times for the June-2024 BTO exercise.
Table 1: Private 99-year leasehold residential non-landed properties in Yishun
Name of Project | Location | Completion date | Total units in project | Median price, $psf | Median rental $psf/month |
North Park Residences | Yishun Central 1 | 2018 | 920 | $1,795 | $5.77 |
Nine Residences | Yishun Avenue 9 | 2015 | 186 | $1,351 | $4.81 |
The Wisteria | Yishun Ring Road | 2018 | 216 | $1,346 | $5.24 |
Skies Miltonia | Miltonia Close | 2016 | 420 | $1,188 | $4.30 |
The Miltonia Residences | Miltonia Close | 2014 | 410 | $1,177 | $3.81 |
The Estuary | Yishun Avenue 1 | 2013 | 608 | $1,298 | $4.02 |
Symphony Suites | Yishun Close | 2018 | 660 | $1,285 | $4.45 |
Eight Courtyards | Canberra Drive | 2014 | 654 | $1,272 | $3.87 |
Source: Mogul.sg Research, URA
Note: The median prices and median rentals in the Table 1 are based on transactions from January to September 2024.
Number of tender bids expected
The GLS tenders for residential sites that closed in the past 12 months drew an average of 2.7 bids each from property developers.
In my opinion, the tender for the Chencharu site could attract about 5 to 8 bids from real estate developers. This relatively high number of bids should not be mistaken as a sign that developers are regaining their confidence in the land sale market. Instead, it is another manifestation of their risk aversion.
The acquisition and development of mixed residential-cum-commercial properties near MRT stations are considered to be less risky compared to other residential development projects, such as long-stay serviced apartments. This is because the launch of the residential units in the mixed-use development usually achieve better response from homebuyers compare to the launch of a non-landed residential project that is not well located, such as being far from a MRT station or the town centre.
In addition, the revenue from the sales of the residential units in a mixed-use project can partially finance the development of the entire project, which will further reduce the financial risk for the developer. Furthermore, owning and operating a suburban retail mall with a substantial population catchment, such as in Yishun, can yield steady rental income for the developer. Currently, there are more than 75,000 households living in Yishun.
Hence, in the current market, developers would gravitate towards less risky real estate developments such as mixed-use projects near MRT stations and Executive Condominiums.
In a truly bullish real estate market, such as from 4Q 2020 to 4Q 2021, each GLS tender for residential sites could draw between 9 and 15 bids, regardless of whether the site is located near a MRT station or not.
Who will bid for this site
The developers who would be interested to bid for the Chencharu site include Frasers Property, GuocoLand, Hong Leong Holdings and Sim Lian Land. Frasers Property developed and operated two major retail malls in the north region, namely Causeway Point at Woodlands and Northpoint at Yishun.
Furthermore, Frasers Property had bid aggressively in September 2013 for the GLS site near the Yishun MRT station, that was subsequently developed into the mixed-use project that includes the 920-unit North Park Residences. Frasers Property’s bid was 47.7% higher than the second highest bid in that GLS tender. To consolidate its dominance in the retail mall segment in the region from Yishun to Woodlands, Frasers Property could be one of the potential bidders in the tender for the Chencharu site.
What is the estimated land value
Based on the current market conditions, the estimated land value for the GLS site at Chencharu Close could reach as high as $1.135 billion or $1,100 psf of development space.
However, the tender will close about 8 months from today. The market conditions could be quite different by then, which will affect the developers’ sentiments and appetite for land, which will subsequently affect the number and level of the bids submitted for the Chencharu site.
Looking to sell or buy a new home? Find out more at Mogul.sg.
Comments