SINGAPORE (EDGEPROP) - This year was a record year for the Good Class Bungalow (GCB) market. Up to end-November, a total of 85 bungalows in GCB areas were sold, with sales value at $2.407 billion. This is double the transaction volume in 2020 (with 46 bungalows sold) and 120% higher in terms of deal value which clocked in at $1.09 billion, says List Sotheby’s International Realty’s director of research Han Huan Mei.

Read also: Why landed property is a great store of wealth

While 2010 may have been a watershed year and still holds the record with 120 bungalow deals done, bungalow prices were lower a decade ago, which translated to total sales value of $2.237 billion. Hence, the transaction value for the first 11 months of 2021 has already surpassed 2010’s.

Based on the top 10 GCB deals this year (see “Top 10 bungalow transactions by quantum: 2020 vs 2021”), it is clear that the bungalows that were sold in 2021 sat on bigger land plots, averaging 26,812 sq ft, compared to an average of 24,263 sq ft in the previous year. Average price of the 10 biggest deals this year was $63 million, which is 50% higher than the $42 million recorded for the top deals in 2020.

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The top GCB transaction this year in terms of both absolute and psf prices is the one at Nassim Road, a property sitting on a 32,160 sq ft, freehold site that changed hands for $128.8 million or a record $4,005 psf.

“The majority of these bungalows are located close to the Singapore Botanic Gardens — Nassim Road, Cluny Park, Cluny Hill, Gallop Park, Woollerton Park and Chatsworth Park GCB areas,” notes List Sotheby’s Han.

The y-o-y jump in average price across all bungalows sold in the Core Central Region (CCR) was even more significant: from $1,948 psf in 2020 to $2,548 psf this year, or a 30% increase (See “Landed sales volume and price psf in Core Central Region”).

It is not just bungalows that have seen a sharp run-up in transaction volume and prices, but terraced houses and semi-detached houses too.

Covid-19 has caused a shift in mindset: “As people spend more time at home due to the pandemic, in-home amenities combined with bigger private open space rank among their top priorities,” says Han. Hence, people are prepared to invest more in a larger property with better amenities, she adds.

Staggering wealth

This was fuelled by the staggering wealth created in emerging sectors such as biomedical, fintech and big tech, along with rebounding stock markets and cryptocurrency gains in the past 20 months or so, notes Han. “The result is that more money has been poured into luxury real estate,” she says. “It is likely that there are still some ultra-high-net-worth [UHNW] individuals and new millionaires who are still on the lookout for bungalows of their choice in 2022.”

Many UHNW individuals still want to upgrade to a GCB, observes KH Tan, founder and managing director of Newsman Realty. “But there is a lack of supply,” he adds. “Among the super-rich are those who want to buy a GCB for their children or grandchildren. Those who are permanent residents are planning to take up Singapore citizenship in order to buy a GCB.”

These newly minted Singapore citizens and bungalow upgraders join the old rich and new rich in prospecting for a GCB. “Demand for brand new landed houses is at an all-time high,” says William Wong, managing director of RealStar Premier. “The trend now is that more buyers are prepared to buy brand new houses even before they are built, compared to the past.” He sees more owners willing to base their multimillion-dollar decision on artists’ impressions of a house. There have also been instances where developers have sold entire housing projects even before they have torn down the old buildings, he notes.

Indeed, 2021 was a banner year for RealStar, which brokered 31 GCB deals in 2021 — “the highest in a decade”, according to Wong. Some of the notable deals brokered by the firm include the GCB at Bishopsgate on a freehold plot of 29,435 sq ft that changed hands for $65 million ($2,208 psf), the GCB at Grange Road sitting on a 28,287 sq ft site that fetched $48 million ($1,697 psf), and the GCB at Belmont Road sitting on a 32,627 sq ft plot that went for $45 million.

Impact of cooling measures

Activity had slowed in 4Q2021 as travel borders eased and people began making holiday plans, notes Wong. Another reason for the lull was the widening gap between sellers’ asking prices and the prices buyers are willing to pay, he adds.

“It will take three to six months before the gap narrows, and transaction activity resumes,” notes Wong. He expects GCB transaction volume to contract by about 30% next year, while prices could increase by 5% to 7%.

The latest round of property cooling measures introduced on Dec 16 is expected to have less of an impact on the GCB market, compared to the private condominium segment and to some extent, the HDB market, reckons Wong. (Find HDB flats for rent or sale with our Singapore HDB directory)

There may be some impact from the tightening in the total debt servicing ratio from 60% to 55%, Wong notes. “Even then, it will only be a small group of buyers who will be affected,” he says. “Landed property buyers, especially GCB buyers, do not generally take the maximum loan amount.”

List Sotheby’s senior associate vice president Steve Tay expects the impact of the latest round of property cooling measures to be less severe on the GCB market compared to Sentosa Cove bungalows. This is because the waterfront residential enclave of Sentosa Cove is the only place in Singapore where foreigners are allowed to buy bungalows. This latest round of property cooling measures sees additional buyer’s stamp duty (ABSD) for foreign home buyers rise to 30%, from 20% before.

ABSD for Singaporeans buying a second property has been increased from 12% to 17%; and hiked from 15% to 25% for the third and subsequent property purchase.

“Many of the buyers who are shopping for a GCB today are already prepared to buy under the name of their spouse or child in order not to incur the higher ABSD for a second or third property,” says Tay.

Tan of Newsman Realty is of a similar view: “Based on the transactions I have brokered over the past five years, none of the buyers had to pay ABSD for a second or third property,” he says. “Those who are in the market for a GCB today may slow down their search in the hope of getting a better price in the coming months.”

‘Wait and see’

Potential buyers are likely to adopt a “wait and see” stance for the next few months, notes List Sotheby’s Tay. “They will observe the market and see if GCB prices will soften in view of the latest cooling measures,” he adds. “Meanwhile, GCB owners are only willing to sell if they feel that the prices offered are fair, as replacement cost is high.”

Bungalow land that has good attributes and is well located will continue to be sought after, says Tay. “The reason transaction volume contracted over the last few months wasn’t a lack of demand,” he points out. “Rather, it was because a lot of the bungalows that were available have already been taken up. Owners have also raised their price expectations, leading to buyers sitting on the sidelines.”

Some GCB owners are not in a hurry to sell and prefer to stay firm on their asking price. “If they can’t get the price they want, they may even withdraw the property from the market,” adds Tay. “If buyers see that prices are not falling as much as they had hoped, they will re-enter the market.”

For property developers buying residential land, while the non-remittable 5% ABSD remains unchanged, ABSD has been hiked from 25% to 35% with immediate effect. The 10% hike in ABSD is likely to eat into developers’ profit margins; hence, Newsman’s Tan expects “a pause in land purchases”.

Transaction activity is likely to be more muted for the next three months, “which is usually what happens in the wake of any new cooling measures introduced by the government”, says RealStar’s Wong.

Check out the latest listings near Nassim Road, Queen Astrid Park, Bishopsgate, Cluny Hill, Belmont Road, Sentosa Cove, Swettenham Close

 

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