SINGAPORE: A recent spate of buying activity in the market for Good Class Bungalows (GCB) has highlighted the rising demand for such landed properties, on the back of a growing class of ultra-high-net-worth individuals, said analysts.
Since the start of the year, 55 GCBs have changed hands in deals totalling S$1.49 billion – outstripping the 50 sales worth S$1.29 billion that were recorded in the whole of last year, according to real estate firm JLL.
Earlier this month, four such bungalows were sold within a span of 48 hours for S$36 million each, according to property site EdgeProp.
Often described as the most exclusive segment of the residential property market, GCBs must be located within 39 select areas gazetted by the Urban Redevelopment Authority (URA). Examples include Sixth Avenue in Bukit Timah and Nassim Road near the Botanic Gardens.
These properties must cover at least 1,400 sqm and must not exceed two storeys.
Based on this criteria, there are fewer than 3,000 such properties across the gazetted areas, estimates Ms Carin Puah, the senior director of capital markets at JLL Singapore.
This makes such properties “the pinnacle of Singapore’s landed homes and a symbol of status”, she added.
“They are sought after by well-heeled Singaporeans for their coveted address, prestige, exclusivity and wealth preservation quality,” said Ms Puah.
“Few existing owners are willing to part with their assets unless for a substantial financial gain or for other personal reasons, such as when the owners are downsizing to smaller properties due to lifestyle change.”
The 50-odd homes sold in the past half a year are strong sales figures, considering that there was an average of 40 transactions for each year over the past decade, said the CEO of Showsuite Consultancy Karamjit Singh.
The deals are getting pricier too - the average sale quantum this year is S$28 million, “far higher” than the 10-year average of S$22 million, said Mr Singh.
WHO’S BUYING AND WHY?
He noted that the current buoyant market is driven by a “significant amount of wealth created", particularly in the technology sector.
“New tech-rich Singaporeans seem to be behind the major purchases driving up land rates and average bungalow prices,” said Mr Singh.
One of these headline-grabbing deals was made by 28-year-old Ian Ang, the co-founder of gaming chair company SecretLab.
He bought a S$36 million property on Olive Road at S$1,537 psf – a record high both in terms of absolute and psf prices for the Caldecott Hill estate, said Ms Pearl Lok, the director of capital markets and investment services at Colliers.
Days later, it was reported that the wife of Grab CEO Anthony Tan had bought a S$40 million GCB in the Bin Tong Park area.
Mr Singh also noted that two GCBs have been sold for more than S$4,000 psf this year - rates that were “previously quite unthinkable bearing in mind the weighted average land rate remains S$1,500 to S$1,600 psf”.
One of those transactions was by the wife of the founder of advanced manufacturing firm Nanofilm Technologies International. She bought a S$128.8 million property along Nassim Road in March.
JLL’s Ms Phua said that in light of heftier buyer stamp duties introduced in 2018, buyers of these homes are usually first-time residential property owners looking to live in them.
This is unlike previously when wealthy families bought multiple such bungalows for investments, she said.
Given that such properties can only be purchased by Singaporeans, she noted that new citizens or young entrepreneurs have accounted for most sales in recent years.
They are typically lured by the properties’ appeal as status symbols which can also preserve wealth, she said.
Colliers’ Ms Lok added that sales are also being driven by the rising number of family offices - which are private wealth management firms that serve ultra-high-net-worth households.
“Singapore’s safe-haven status is increasingly valued amid global geopolitical uncertainties ... It is not surprising that part of the additional wealth created gets channelled into luxury residential homes which serve as a status symbol other than providing a comfortable home,” she said.
But not all GCBs are made equal. “Buyers tend to be extremely discerning so a lesser address or plot configuration might be harder to trade,” noted Ms Lok.
Another factor to consider is the constraints in developing GCBs. For instance, regulations stipulate that the house cannot take up more than 40 per cent of the plot, and there must be sufficient greenery in between bungalows and their neighbours.
Still, there could be “more upside” to this, as it protects the format and character of such properties, said Ms Lok.
She added that the outlook for the segment is bright, given “increasing global wealth and family offices setting up in Singapore”.
JLL’s Ms Puah agreed, saying prices will continue to rise, as the allure of owning GCBs continues to draw high-net-worth individuals.
Heading into the second half of the year, Showsuite Consultancy’s Mr Singh expects the market to remain active, with “demand outstripping supply”.
“Prices for choice plots would continue to trend upwards by at least another 10 per cent. Sellers too are raising their expectations," he said.
“Eventually the momentum would stabilise by early next year before prices begin to plateau at the new levels."