Orchard Road home prices to hit $4,000 psf soon?

Orchard Road home prices may breach the $4,000 per square foot (psf) mark given the aggressive bidding for prime sites within the area, suggested a note from DBS Group Research. The bank noted the recent activities of developers (like Hong Kong-listed Shun Tak) as well a movement in the real estate sector (like the recent acquisition of Park House), to arrive at their conclusion.

Hong Kong-listed Shun Tak reported that it has purchased two prime residential sites in Orchard Road for $593.5m in total, while the first site is 21 Orchard Boulevard (Park House), acquired via a collective sale for S$375.5m which translates to a new record of S$2,910 per square foot per plot ratio (psf ppr). This is a new Orchard Road home prices record.

The The 60-unit Park House development is a freehold site of c.46,084 square feet (sqft) with a plot ratio of 2.8 and can be redeveloped into a new luxury residential development with gross floor area of 129,035 sqft with no development charge. The public tender was understood to have seen “overwhelming responses” from developers in Hong Kong, Singapore, Malaysia, China and Indonesia.

CBRE announced on 13 June that a new Orchard Road home price record was set in the successful collective sale of Park House. The public tender was awarded on 1 June 2018 to Shun Tak Cuscaden Residential Pte Ltd, a wholly owned subsidiary of Shun Tak Holdings Limited which is a listed company in Hong Kong.

The sale set a new benchmark in Orchard Road home prices and exceeded the previous peak price of S$2526 psf per plot ratio which Hong Kong’s Swire Properties paid for the Hampton Court collective sale site at Draycott Park in January 2013. The Hampton Court sale was also handled by CBRE.

According to the Urban Redevelopment Authority’s baseline record, no development charge is payable, including the 10% bonus GFA for balconies. Zoned residential under the 2014 Master Plan, the site area is approximately 46,084 sq ft and has a plot ratio of 2.8. Shun Tak Holdings Limited intends to redevelop the site into a luxury residential development with expected completion by 2023.

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Park House is a rare freehold 60-unit development in Orchard Road, comprising 56 apartments and 4 shop units. Each apartment unit owner and shop unit owner will stand to receive a gross payout of approximately S$6.1 million and S$8.1 million respectively.

Commenting on the successful collective sale, Jeremy Lake, Managing Director of CBRE Capital Markets said: “The response from local and foreign developers was overwhelming; we conducted more than 20 site inspections with developers from Hong Kong, Malaysia, Singapore, China and Indonesia. All of them immediately recognized the positive attributes of Park House including its very prominent yet exclusive location on Orchard Boulevard, the accessibility to the Orchard Road shopping belt and the short walking distance to Orchard Boulevard MRT when it is completed in 2021“.

DBS noted that a second site, 14 & 14A Nassim Road, which was also purchased by Shun Tak for S$218m is located at one of Singapore’s most coveted addresses in Singapore. This site was acquired at S$218m, or S$2,744 psf ppr with development charge. The property sits on a 66,452 sqft freehold site and has a plot ratio of 1.4x and can be redeveloped into a luxury project with GFA of 93,033 sqft.

The Bank said that these bold bids placed by Shun Tak (as the bid prices imply) suggests that Orchard Road home prices will test new heights soon.

“Based on our estimates, after assuming a 10% balcony bonus, the break-even levels for Park House and 14 & 14A Nassim Road are S$3,300 psf and S$3,100 psf respectively. This implies that these projects could potentially be launched at a price nearing or even breaching the S$4,000 psf mark.,” the Bank’s note said.

It added:

“Shun Tak has till now only invested selectively in Singapore through commercial and hospitality projects and these two sites will widen the group’s real estate exposure. While such land sites are generally rare in Singapore, the group could look to launch these projects to Hong Kong buyers who might be keen to invest in a residential home in Singapore, which is at the start of a property upcycle.

The entire stretch of Cuscaden Road is for sale. While the Nassim site will attract its own niche of high end buyers, we note that with over 20 sites sold within the core central region (CCR) year to date, supply in the CCR for new developments is building up in the near term and competition for buyers’ attention is heating up as well.

Together with YTL’s 77-unit 3 Orchard by the Park (the former Westwood Apartments which was sold via en bloc in 2007 at S$2,545 psf) and the government land sales (GLS) site won by the consortium of SC Global, Far East Consortium and New World Development (awarded at S$2,387 psf), almost the entire stretch along Cuscaden Road opposite Regent hotel will be launched for sale over the coming few years.”

The big question though is, “will buyers bite with Orchard Road home prices set at close to S$4,000 psf?”

Mr Paul Ho, chief mortgage consultant at icompareloan.com noted that the Orchard Road home prices reflect the increasing demand and reducing supply.

“Statistics suggest that Core Central Region (CCR) comprising of Districts 1, 2, 10 and 11 besides District 9, has risen less compared to Rest of Central Region (RCR) for many years now – and the price differential is narrowing,” he said.

Adding: “Either RCR is overpriced or CCR is under-priced. For investors who are looking at superlatives, definitely the best of the best will do. Savvy investors (those who already have more than 1 property) will however stay away from the market as the prices are crazy and the fundamentals are weak and there is huge supply in the pipeline.

The upcoming launch of 3 Orchard by the Park by end June will provide us with an answer as to where the new Orchard Road home prices will go.

If you are a home hunting for a property at Orchard Road, our Panel of Property agents and the mortgage consultants at icompareloan.com can help you now.

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