http://www.businesstimes.com.sg/real...te-fewer-sales

Higher GCB prices despite fewer sales

Depleted supply of bungalows keeps prices firm even as transactions fall to 10-year low

By Fiona Lam

[email protected]

4 Apr


PRICES of good class bungalows (GCBs) are likely to rise or hold firm this year while the number of transactions remains low, property market observers say.

Barring shocks to the economy, GCB prices will hold firm in 2015 due to the lack of supply and the fact that the GCB market "caters to a very stratified layer of the privileged few", says Savills Singapore research head Alan Cheong.

As it is, the median per square foot (psf) price for each GCB has increased despite fewer sales in the past five years, according to data compiled by SRX Property and ERA Research.

From 2010 to 2014, the annual number of GCB transactions fell from 80 units to a 10-year low of 15 units, the study found. In the same period, the median psf price for each unit rose 35 per cent from S$1,107 psf to S$1,490 psf, ERA Realty said in a press release earlier this week.

In 2013, the median psf price for each unit was S$1,378. For 2015, the year-to-date median psf price is S$1,543, based on the three transactions recorded so far.

GCB sellers are generally affluent individuals, so many of them are unaffected by market changes, ERA said. As they are not under pressure to sell, they tend to hold, or expect to sell for a premium. The supply of GCBs available for sale has depleted by 10 per cent from last year, largely due to buyers not offering prices which sellers are ready to accept, said Henry Lim, head of ERA's GCB division.

GCB prices will continue to rise, with at least a 5 per cent increase this year, Mr Lim added.

Newsman Realty managing director KH Tan believes prices will rebound in the last quarter as a higher number of serious buyers enter or return to the market.

At end-2014, Newsman Realty handled fewer than 10 GCB viewings each month, but in the last month it has had more than 10 appointments every week, Mr Tan said.

"So the market is not dead; it's moving," he added.

However, the average deal size per GCB transaction has come down.

According to a past BT report quoting CBRE's data, the average price per GCB deal eased 5 per cent to S$22.36 million in 2014, from S$23.52 million in 2013.

RealStar Premier Group chief executive William Wong has also observed average prices per transaction falling and expects them to drop marginally by 2-3 per cent closer to the end of this year.

He said a number of GCBs have been sold in the S$23-25 million range this year, compared to S$30 million in 2013 and early 2014.

"So once the transaction records and caveats are out, more buyers will be aware that prices have fallen - which would make it difficult for some sellers to ask for a higher price," he said.

With prices now more attractive to buyers, Mr Wong said transaction volume in 2015 should increase 20-30 per cent year-on-year.

Savills, ERA and Newsman, however, expect GCB transactions to remain low this year, at levels similar to 2014's. "The dearth of IPOs here has dampened demand from the nouveau riche, who are mostly entrepreneurs who have just successfully listed their companies," Savills' Mr Cheong said.

ERA's Mr Lim expects about 15 GCBs to be sold, with an expected total value of S$450-500 million. Last year, the total value of GCBs transacted was S$474.2 million.