Good Class Bungalow sales still afloat while Sentosa Cove’s capsize

January 26, 2015 11:22 AM SGT

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SINGAPORE: This has been an uncharacteristically quiet year in the luxury bungalow market.

“We’ve probably experienced the toughest year in a decade, not since 2004,” pronounced William Wong, managing director of RealStar Premier Group, which focuses on marketing landed homes.

“It’s even more challenging than the global financial crisis in 2008.” Wong blames the total debt servicing ratio (TDSR) for taking a toll on market sentiment and transaction volume.

During the global financial crisis, buyers who were prepared to invest were still able to do so, he says.

Now, the property cooling measures, especially the TDSR, have made it more onerous for buyers.

Bearing the brunt of the market fallout was Sentosa Cove, where bungalow transactions totalled just three this year compared with 18 a year ago, according to figures from CBRE Research.

The average bungalow price in Sentosa Cove also plunged 21% to $1,676 psf, from $2,123 psf last year.

Douglas Wong, CBRE’s head of luxury homes, attributes the lower price psf to the smaller land areas of 7,341 to 8,654 sq ft of the bungalows transacted in Sentosa Cove this year.

Many of these also do not have direct sea views, he points out.

This is unlike the preceding years of 2012 and 2013, when most of the bungalows sold occupied larger plots of more than 11,000 sq ft and had direct sea views, he explains.

Besides the TDSR, Sentosa Cove bungalow transactions have also been hurt by the hike in the additional buyer’s stamp duty (ABSD) to 15% for foreigners buying residential property.

“The hefty ABSD and the strong Singapore dollar quite likely turned foreign buyers away,” says Joseph Tan, CBRE’s executive director of residential services.

Notably, only one of the three bungalow buyers this year was a foreigner.

Even though Good Class Bungalow (GCB) transactions took a tumble in 2014, the fall was milder relative to Sentosa Cove.

This year saw a total of 26 GCBs changing hands compared with 29 in 2013, according to CBRE Research.

Average prices of GCBs sold also increased by 8.7% to $1,454 psf this year, from $1,338 psf in 2013.

One reason why GCB prices have been relatively resilient this year is because there were six GCBs sold at prices of $30 million and above, and quite a number of them were relatively new and in very desirable locations, thereby driving up average unit prices, points out Samuel Eyo of USP Pte Ltd, a boutique realtor firm focusing on luxury property.

For example, one of a pair of newly completed GCBs in Holland Park developed by Frasers Centrepoint.

It fetched $30 million ($1,991 psf) in early November.

Another noteworthy transaction was that of a GCB in Cluny Hill that changed hands for $30 million ($1,997 psf) in February, and one in Cable Road that was sold for $31.8 million ($1,904 psf).

On the other hand, last year saw just four GCBs and one bungalow in Sentosa Cove sold where prices crossed the $30 million mark.

CBRE’s Tan foresees transactions of both GCBs and Sentosa Cove bungalows in 2015 to be in line with the volumes seen this year, with GCBs numbering 20 to 30, and Sentosa Cove bungalows at less than 10.

“Generally, there is still interest in these trophy homes because of their limited supply and the prestigious lifestyle they offer to the ultra rich,” he says.

K H Tan, managing director of Newsman Realty, who specialises in luxury bungalow sales, agrees.

With Sentosa Cove prices “at more attractive levels”, he sees buyers coming back.

Their return might even lead to a slight uptick in prices next year, he adds.

Newsman’s Tan reckons interest from wealthy mainland Chinese could return next year.

Many are drawn to Singapore for their children’s education, the healthcare system, as well as a generally safe and secure environment for the rich, says Tan.

“Another consideration may be the business opportunities and proximity to neighbouring Asean countries.” The recent protests in Hong Kong have also caused some investors to consider diversifying their portfolios.

Anecdotally, two Singaporean buyers who have been active investors in Hong Kong have recently approached Newsman’s Tan to explore the possibility of entering the GCB market.

Pent-up demand could also lead to a gradual pick-up in deals next year, says RealStar’s Wong.

“Asking prices of some of the bungalows have also come down to reasonable levels,” he says.

“In fact, many of our clients say they are more prepared to re-enter the market in 2015.”

This article appeared in the City & Country of Issue 658 (Dec 29) of The Edge Singapore.

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