[UPDATE] Good Class Bungalows: Back to reality in 2023

/ EdgeProp Singapore |
The GCB that scored the highest psf price this year is at White House Park. It changed hands in August for $45.5 million or $3,017 psf (Photo: Samuel Isaac Chua/EdgeProp Singapore)
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SINGAPORE (EDGEPROP) - Transactions of Singapore’s most expensive homes — the Good Class Bungalow (GCB) market — wilted in 2022, with 43 deals done at a total sales value of $1.157 billion in the first 11 months of the year. This reflects a 55% plunge from the 90 GCBs that changed hands to the tune of $2.57 billion in 2021.
“Concerns over the rising cost of debt, higher inflation and a looming recession caused some investors to hold back on acquisitions until projections of global rate hikes become clearer,” says Han Huan Mei, director of research, List Sotheby’s International Realty.
GCB sales volume is expected to moderate in 2023. “The transaction level next year is not going to be super-hot like it was in 2021,” concedes GCB specialist and managing director of Newsman Realty, KH Tan. “It’s going to be similar to this year’s.”
Source: List Sotheby's International Realty
Significant increases in bungalow prices over the past three years were to blame, with sellers constantly raising price expectations, according to property consultants. The biggest round of adjustments came after the sale of a 32,160 sq ft freehold site in the coveted Nassim Road area that fetched $128.8 million ($4,005 psf). Transacted in March 2021, it was the most expensive GCB last year in absolute terms.
The buyer was Jin Xiao Qun, wife of the founder and executive chairman of Nanofilm Technologies International, Dr Shi Xu. The seller was Sukmawati Widjaja, aka Oei Siu Hoa, whose family controls the Indonesian conglomerate Sinar Mas Group.
The 32,160 sq ft freehold site in the coveted Nassim Road area fetched $218.8 million ($4,005 psf) in March 2021. It was the most expensive GCB last year in absolute terms (Photo: Samuel Isaac Chua/EdgeProp Singapore)

A wave of asset repricing

At $4,005 psf, the Nassim Road property held the title for most expensive GCB in psf terms for just one brief month before ceding it to the GCB at Cluny Hill, purchased for $4,291 psf in April 2021. The buyer was Tommy Ong, founder of Shopify review app Stamped.io, who paid $63.7 million for the GCB on a 14,844 sq ft freehold site while the house was still under construction. The seller, Sebestian Soh, founder and director of development advisory firm, Meir Homes, would be completing the house for the buyer. The Cluny Hill GCB was his first project. Meir Homes will be launching a second GCB property in 2023.
The Nassim and Cluny areas were the epicentres of these record-breaking deals and set off a wave of asset repricing that reverberated across the entire GCB market. “Prices reached a new threshold in 2021, and we are unlikely to see GCB values fall below those levels,” says Steve Tay, senior associate vice-president, List Sotheby’s International Realty.
Newsman Realty’s Tan estimates that prices of GCBs in the vicinity of the Singapore Botanic Gardens, such as Nassim and Cluny areas, are now in the $4,500 psf to $4,800 psf range. While prices of most GCB areas will stabilise, he expects prices in the Nassim and Cluny area to “continue to go up”.
Asking prices certainly have. In late September, three GCBs at Nassim Road were launched for sale by Cuscaden Peak Investments. The GCBs sit on land sizes ranging from 15,131 sq ft to 15,542 sq ft, with asking prices from $78.68 million to $80.82 million, or an average of $5,200 psf. Three bids were received, although RealStar Premier, the exclusive marketing agency, was not at liberty to disclose what they were, citing a “non-disclosure agreement”.
“If the three GCBs at Nassim Road cross the $5,000 psf threshold, it will set a new benchmark,” says Newsman’s Tan.
The Good Class Bungalow that was sold at the highest absolute price this year was the one at Chancery Lane for $66.06 million (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Most expensive GCBs of 2022

In 2022, the most expensive GCB in terms of absolute price was for a single-storey pre-war bungalow at Chancery Lane sitting on a 34,216 sq ft freehold site in prime District 11. The GCB fetched $66.06 million ($1,931 psf), according to a caveat lodged on March 3. And it is the highest psf price in the neighbourhood.
The buyer was Kelsey Cheng Tan, wife of Kester Tan, the youngest son of Filipino tycoon and chairman of Alliance Global Group, Andrew Tan. The sellers were brothers Mirza Mohamed Mehdi Namazie and Mirza Iskandar Namazie, grandsons of M.A. Namazie, a wealthy Persian merchant who came to Singapore in 1909.
The GCB that scored the highest psf price this year is at White House Park. It changed hands in August for $45.5 million or $3,017 psf. The buyer was Fu Wei, founder and CEO of CBC Group, a healthcare-dedicated asset management firm.
This year, the GCB that registered the lowest psf price was for a 25,272 sq ft, freehold property on Lornie Road that changed hands for $24.8 million ($981 psf) in January. It was the only GCB transaction this year that fell below $1,000 psf. The buyer was James Koh, executive chairman and founder of Fragrance Group.
While transaction volume in 2022 is half that of the previous year’s, average prices of GCBs sold have increased 11.6% to $1,889 psf from $1,692 psf a year ago, according to List Sotheby’s Han. She expects GCB prices to hold or ease marginally in 2023.
The 5% hike in additional buyer’s stamp duty (ABSD) for Singaporeans buying their second and subsequent property in December 2021 led investors to set aside a higher cash outlay for their purchases, Han says. “Concerns over the rising cost of debt, higher inflation and a looming recession caused some to hold back on acquisitions until projections of global rate hikes become clearer.”
The Good Class Bungalow at Cornwall Gardens was sold for $47 million ($2,162 psf) in September (Photo: Samuel Isaac Chua/EdgeProp Singapore)

New pool of buyers

As the macroeconomic outlook continues to darken, Singapore stands out as “a stable financial hub with transparent and business-friendly laws as well as a safe environment for its residents”, List Sotheby’s Tay points out. This is evident from the record number of family office applications in Singapore, with close to 900 set up in 2022 to date, despite tighter regulations imposed by the Monetary Authority of Singapore, in terms of an increase in assets under management and hiring of local executives, he notes.
Tay sees many opting for the Global Investor Programme (GIP), which enables the successful applicant to apply for Singapore Permanent Residence (PR) status. “A percentage of PRs have also successfully applied to be Singapore citizens,” he says. “Those successful in obtaining Singapore citizenship will eventually want to own a home befitting their status and family needs — a GCB.”
Demand for GCBs in 2023 will therefore be supported by this new pool of buyers “alongside locals, especially the younger generation with newly acquired wealth, who see GCBs as the pinnacle of landed housing and a status symbol along with large living spaces for the families’ needs”, says Tay.
The ultra-high net worth (UHNWI) families that are setting up base in Singapore hail from the US, Europe and Asia, says Newsman’s Tan. But those in the GCB market are predominantly from China, India and Indonesia, he adds.
Hence, according to List Sotheby's Tay, GCBs that are “priced in line with fair market valuations” based on location and land attributes continue to be sought after by potential buyers. “Most of the deals that took place this year were those where the sellers were willing to lower their price expectations to meet buyers’ offers.”
Newsman’s Tan concurs. “Last year, buyers were willing to pay premium prices for a GCB,” he says. “This year, they are more cautious.”
The most recent Good Class Bungalow transaction based on caveats lodged was the GCB at Astrid Hill that was purchased for $55.088 million in November (Photo: Samuel Isaac Chua/EdgeProp Singapore)

Switch to detached houses

There are over 2,700 GCBs in 39 gazetted areas today, and they make up just 25% of the 10,761 detached houses in Singapore, based on URA data as at 3Q2022.
Even while transaction volume in the GCB market is expected to slow in 2023, William Wong, managing director of RealStar Premier sees activity in the detached house segment continuing to hold.
“The main reason for slower transactions in the GCB market is the wider price gap between sellers and buyers today,” says Wong. He estimates the gap to be in the 5% to 10% range.
GCB prices have gone up so rapidly over the past three years that those who found GCBs out of their reach have switched to detached houses with 8,000 sq ft to 12,000 sq ft land area instead, according to Wong. This explains why overall prices of detached houses have appreciated by about 15% for the whole of 2022.
Wong forecasts that new detached houses in the prime Districts of 9, 10 and 11 could hit the $4,000 psf threshold, while those in the Katong area in prime District 15 may cross $3,500 psf.
“The detached house segment is more promising than the other landed housing segments — GCBs, semi-detached houses and terraced houses,” says Wong. “GCB transactions have slumped due to pricing mismatch, but the buyers in the semi-detached and terraced house segments are affected by the higher interest rates and borrowing costs as they tend to take on more leverage for their home purchase.”
In the Raffles Park neighbourhood, RealStar Premier brokered the sale of a detached house at Oriole Crescent for $23.5 million, according to a caveat lodged in August (Photo: Google Maps)

New highs

Detached house prices have also hit new highs. In April this year, a developer sold a new detached house sitting on a 4,370 sq ft freehold site at Camborne Road for $15 million ($3,433 psf). It set a new record for a new detached house in Dunearn Estate in prime District 11, points out Wong.
Meanwhile, in the Raffles Park neighbourhood, RealStar Premier brokered the sale of a detached house at Oriole Crescent for $23.5 million, according to a caveat lodged in August. The existing house sits on a freehold site of 10,540 sq ft; hence the land rate of $2,203 psf is a new benchmark for the Raffles Park area in prime District 11.
Two detached houses in the neighbouring Cassia Drive changed hands for $22 million this year. One was a nicely-renovated detached house sitting on a freehold site of 9,973 sq ft and fetched $2,206 psf in January, while the other sits on a freehold site of 10,625 sq ft and changed hands for $2,071 psf in April this year. Both were done at lower land rates relative to the detached house at Oriole Crescent.
In terms of the GCB market, Wong expects sales in 1H2023 to languish but gather momentum in 2H2023. While overall GCB transactions may drop 20% for the full year, prices are expected to remain relatively stable, “perhaps even see a marginal appreciation of 2% to 5%” next year, he adds.

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