Insights gained from a Tanglin Hill GCB transaction for S$93.9 million

Insights gained from a Tanglin Hill GCB transaction for S$93.9 million

It is possible for developers to dream big, and the pricing seems reasonable considering the built-up area and the requirements.

Aug 5, 2024

When it comes to Good Class Bungalows (GCBs), it is not unheard of for people in Singapore to pay staggering amounts of money.

There are around 2,700 GCBs that are located in 39 gazetted districts. These GCBs have a scarcity value and are considered to be the most desirable homes in the market. Camden Park, Cluny Park, Nassim Road, and Victoria Park are some of the neighbourhoods in Singapore that are home to these houses, which are typically exclusively available for purchase by citizens of Singapore.

It is required by the planning requirements for bungalows in GCB Areas that the plot size be at least 1,400 square meters, which is equivalent to approximately 15,070 square feet (sq ft).

Nevertheless, a transaction that involves the selling of a freehold bungalow in Tanglin Hill for close to S$93.9 million stands out as particularly noteworthy. As an example, the Buyer's Stamp Duty amounts to approximately S$5.6 million in total.

A new record land rate for a GCB has been set with the price per square foot (psf) of land area coming in at roughly S$6,200 on the land area that occupies 15,150 square feet.

As the lifestyle developer Meir Homes, the Soh family is responsible for the development of the home that is currently under construction. In addition to having six bedrooms and a swimming pool, the house will include a high-ceiling attic and a spacious basement. Additionally, the house will have two stories. The basement incorporates the entertainment spaces, a wine cellar, and parking for more than a dozen automobiles, making up the over 30,000 square feet of built-up space that is included in the property.

Upon conducting an analysis of this Tanglin Hill GCB sale, one can derive a number of important insights.

To begin, a developer of a great landed property ought to have a sense of achievement. One can entice a buyer with the proper product if they build a large product and set the price high. Going future, it is possible that a buyer of a new GCB that has a large built-up area and high standards may need to allocate approximately one hundred million Singapore dollars. One of the most attractive aspects of selling a bespoke property is that all that is required is to find a single buyer who is willing to pay a reasonable price.

As an alternative to constructing a boutique condominium with fifty apartments and a gross development value (GDV) of close to one hundred million Singapore dollars, a developer might be better off constructing one GCB with a GDV that is comparable. In the latter case, the inventory is totally cleared out after a single transaction is completed. On the other side, if one chooses the former option, it can be difficult to sell the project's remaining few units that are less desirable.

By closing a sale for S$100 million, a developer who has spent almost S$50 million on the purchase of property measuring more than 15,000 square feet in a preferred position in the GCB and nearly S$40 million on other development costs may be able to make a satisfactory return on their investment.

Additionally, because it takes time and effort to reconstruct an old GCB, some wealthy buyers would opt to hire a developer to create a finished GCB that meets their high specifications.

A GCB buyer who need additional time to restructure his portfolio and make arrangements for financing may place a high importance on having a great degree of flexibility in the way the deal is structured, such as a lengthy amount of time to exercise a purchase option.

Maximum use of the envelope

Two, maximising the amount of land that can be developed could be the best option for private landed residences in this area. There is a possibility that owners are encouraged to create the maximum amount of a building that is permitted for each inch of land, despite the fact that construction costs are higher. The proportion of a house's gross development cost that is comprised of land costs decreases as the built-up area of the house grows.

GCBs that are newly constructed are two-story buildings, and their site coverage is limited to forty percent of the land area that they are located on. There is the potential to construct a mezzanine floor as well as an attic. It is possible for two-story landed residences to reach a maximum overall height of 12 meters, which includes the attic. In addition, a GCB may have a totally submerged basement, provided that it is situated back from the site's boundary lines; nevertheless, this is contingent upon a number of other requirements.

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There were 4.07 people living in landed residences on average among resident households in 2023, which is an increase from 4.65 people in the year 2000 and 4.39 people in the year 2010. It is possible that the economic logic of building mega-sized houses will continue to hold sway, despite the fact that the number of households in landed homes is not increasing, buyers have environmental concerns, and higher property taxes are likely to apply to homes with greater built-up areas.

According to the projected price per square foot of the built-up area, which is around S$3,100, the Tanglin Hill GCB purchase would be a good representation of value.

The aforementioned price is low in comparison to the price per square foot of the saleable area of some prime condominiums, however it is not directly comparable to that price. An apartment on the 57th floor of the new building Skywaters Residences, which is located along Shenton Way, was sold in May for S$47.34 million, which is equivalent to S$6,100 per square foot. This price per square foot is a record for a 99-year leasehold house.

Transactions in freehold condominiums, such as Les Maisons Nassim and The Marq on Paterson Hill, which are located relatively close to Tanglin Hill, have been completed at prices that are higher than sixty thousand Singapore dollars per square foot.

If you live in a condominium, you will have access to the shared facilities, such as the function room or the gymnasium. On the other hand, if you live in a landed property, you will be responsible for providing these amenities within the complex. However, inhabitants who are wealthy may place a high value on the privacy that GCB living provides.

Furthermore, a condominium owner may be required to facilitate the resolution of potential disagreements between the various strata owners about matters that are relevant to all of the residents of the property.

Impact of taxes

According to the fourth point, the Additional Buyer's Stamp Duty (ABSD) regime can encourage a greater amount of investment in the primary dwelling of a household.

When purchasing a first property, a Singaporean resident is not required to pay the ABSD. Twenty percent of the ABSD rate is applied to the purchase of a second home by a local resident, and thirty percent is applied to the purchase of a third and subsequent home.

Take, for example, a Singaporean family consisting of a couple with two grown children who are extremely rich and who want to invest approximately 160 million Singapore dollars in residential property.

In the scenario described above, it could be prudent to spend close to one hundred million Singapore dollars on a GCB to serve as the family's primary residence, in addition to spending approximately twenty million Singapore dollars each on three luxury apartments that will be rented out in order to generate rental income. If each member of the family claims each of the four properties as their first property, then there is no obligation to pay ABSD on any of the homes.

On the other hand, the family will be subject to a significant amount of ABSD if they spend thirty million Singapore dollars on the primary residence and one hundred thirty million Singapore dollars on ten investment residences.

The GCB market is bolstered by a number of favourable factors, the most important of which is Singapore's appeal to wealthy individuals. Therefore, you should anticipate that developers who are familiar with the market will offer mansions that are equipped with all the bells and whistles, and that buyers would pay probably new record amounts for trophy homes on the market.

However, despite the fact that GCBs have the potential to be magnificent family treasures that can be passed down from generation to generation, the possibility of future tax increases could make it difficult to keep such relics.