Good Class Bungalows to remain sought-after this year

Overall, their prices are likely to rise by 5 to 8 per cent this year, kept in check by ABSD and TDSR, which remain in place

FEB 10, 2018

DOREEN GOH


SALES of Good Class Bungalows (GCBs) - the pinnacle of Singapore's landed housing segment - rose to a five-year high last year.

Based on caveat records from the Urban Redevelopment Authority's Real Estate Information System (URA REALIS), 41 GCBs with a cumulative worth of S$867 million changed hands in 2017, up from 37 GCB transactions worth S$789 million the year before.

These 41 GCBs were transacted at prices ranging from S$858 to S$2,351 per sq ft on land area, depending on a confluence of factors including the location, plot size, terrain and the condition of the bungalow.

Notably, while by definition GCBs are required to have a minimal plot size of 1,400 sq m or 15,069 sq ft, those with land plots smaller than that when the 39 GCB areas were gazetted in 1980 are still classified as GCBs.

The pick-up in buying activity had coincided with an improvement in Singapore's economic growth and a strengthening private residential housing market in 2017.

Demand was also underpinned by the fall in GCB prices, which corrected by around 13 per cent in 2016, from its recent 2014 peak, going by caveat records.

More realistic

This came amid more realistic price expectations from genuine sellers and was in tandem with the island-wide price movement for detached homes. JLL Research found that prices of detached houses with minimum land area of 5,000 sq ft in both prime and non-prime districts fell by 18-19 per cent from 2014 to 2016.

With economic prospects looking positive, we expect GCBs to remain sought after in 2018. However, pricing and the available stock for sale will remain key considerations.

For one, the stock of GCBs is limited. The URA counts some 2,800 plots in 39 safeguarded GCB Areas; of the 2,800, 65 have been gazetted for conservation. The majority of these are in the prime districts 10 and 11, although some GCB Areas such as Binjai Park, King Albert Park, Windsor Park, Kilburn Estate and Chestnut Avenue are located outside the prime districts.

In addition, few owners are willing to part with their assets unless they get an attractive offer, or for personal reasons.

Meanwhile, the buyer pool is small, because ownership of GCBs is restricted to Singaporeans. These days, GCB buyers comprise largely Singapore corporates, ultra-high-net-worth Singaporean families and Singaporean entrepreneurs in their 40s, as well as new citizens, with those originally from China particularly prominent.

These individuals seek GCBs for their coveted address, prestige, exclusivity, wealth-preservation quality and measure of their financial success. As supply is unlikely to change significantly in the foreseeable future, this would further enhance the wealth preservation quality of these prized freehold assets.

Notwithstanding the restricted demand pool, prospective sellers are expected to raise or be firmer on their price expectations in 2018. This is in view that genuine buyers are likely to be more willing to commit earlier rather than later, taking into consideration that GCB prices have started to firm, with anecdotal evidence based on caveat records indicating a marginal 0.8 per cent rise in GCB prices last year.

However, GCB prices are not expected to run away this year as the Additional Buyers' Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) requirements will continue to temper prices that buyers are prepared to offer.

In light of the above, we expect overall GCB prices to rise by five to eight per cent this year. Transaction volumes could also surpass last year's level moderately.

The writer is the associate director of Research & Consultancy, JLL Singapore