In 2023, Good Class Bungalows will return to reality

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The most expensive transactions in Singapore’s properties – those in the Good Class Bungalow (GCB) market — declined in 2022 with 43 transactions that were completed for a total amount of $1.157 billion during the first eleven months. This is the 55% reduction of the 90 GCBs which were sold for a total in the amount of $2.57 billion by 2021.

“Concerns about the increasing cost of borrowing, higher inflation and a possible recession have caused some investors to delay buying until the forecasts for global rate hikes are clearer,” says Han Huan Mei director of research at Listing Sotheby’s International Realty.

GCB sales are expected to decrease in 2023. “The amount of transactions in 2023 will not be as dramatic as that of 2021.” says GCB manager and specialist at Newsman Realty, KH Tan. “It’s likely to be comparable to the one we had this year.”

The significant rises in the prices of bungalows in the last three years have been the reason the constant increase in expectations for prices, according property experts. The largest round of changes was the result of the sale of 32,160 sq ft of freehold site located in the sought-after Nassim Road region that was worth $218.8 million ($4,005 per sq ft). The transaction was completed in March 2021. this was by far the highest priced GCB this year in absolute in terms.

Buyer is Jin Xiao Qun, wife of the chairman of the board and the founder of Nanofilm Technologies International, Dr Shi Xu. the seller’s name of the transaction was Sukmawati Widjaja, also known as Oei Siu Hoa’s family, which runs Sinar Mas Group. Indonesian group Sinar Mas Group.

A wave of repricing of assets
With a price of $4,005 per sq ft at the time, the Nassim Road property held the title of the most expensive GCB in terms of psf for a short time before it was sold to the GCB located at Cluny Hill, bought for $4,291 psf April 2021. Buyer was Tommy Ong, founder of Shopify review site Stamped.io and was able to pay $63.7 million to purchase the GCB with a 14,844 square feet freehold site even though the house was in construction. Seller Sebestian Soh who is the founder of and executive director at the development advisory firm Meir Homes, would be finishing the house in order to sell it. This Cluny Hill GCB was his first venture. Meir Homes will be launching another GCB property beginning in 2023.

It is believed that the Nassim and Cluny areas were at the heart of these record-breaking deals . They led to a surge of asset repricing which reverberated across the GCB market. “Prices have reached a new level in 2021. We will not witness GCB values decline below those values,” says Steve Tay the senior vice-president of sales and marketing at List Sotheby’s International Realty.

The Newsman Realty’s Tan estimates that prices for GCBs near Singapore Botanic Gardens. Singapore Botanic Gardens, such as Nassim and Cluny areas, are currently at $4,500 to $4,800 per sq ft range. While prices in the majority of GCB areas are expected to stabilize but he expects the rates within areas like the Nassim and Cluny region to “continue to rise”.

The asking prices definitely aren’t the only thing to consider. In the last week of October, three of the GCBs located at Nassim Road were launched for auction from Cuscaden Peak Investments. The GCBs are situated on land that ranges from 15,131 sq feet to 15,542 sq ft., and the asking price ranges between $78.68 millions to $80.82 million, which is the average price of $5,200 per sq ft. Three bids were accepted but RealStar Premier, the exclusive marketing agency had no authority to reveal what the bids were due to an “non-disclosure contract”.

“If all three GCBs on Nassim Road cross the $5,000 PSF threshold, they’ll establish a new benchmark,” reports Newsman’s Tan.

The most expensive GCBs of 2022
The highest-priced GCB in absolute value was an unfurnished, single-storey bungalow built prior to the war at Chancery Lane sitting on a 34,216 square feet freehold site in the District 11 area of prime. The GCB was worth $66.06 million ($1,931 per square foot) in accordance with the caveat filed on the 3rd of March. This is the top price for psf in the neighborhood.

Buyer is Kelsey Cheng Tan, wife of Kester Tan the youngest son of Filipino businessman and chairman of the Alliance Global Group, Andrew Tan. They were the brothers Mirza Mohamed Mehdi Namazie and Mirza Iskandar Namazie, grandsons of M.A. Namazie an affluent Persian merchant who arrived in Singapore during 1909 to settle in Singapore.

The GCB which scored the highest psf rate this year is White House Park. The park was sold during August, for $45.5 million, which is $3,017 psf. Buyer was Fu Wei, founder and CEO of CBC Group, a healthcare-dedicated company that manages assets.

This year was the GCB which recorded the lowest price per square foot is a 25272 square feet, freehold property located on Lornie Road that changed hands for $24.8 million ($981 per sq ft) on January. This was the sole GCB transaction in the year that was under $1,000 per sq ft. Buyer was James Koh, executive chairman and co-founder of Fragrance Group.

Although the volume of transactions in 2022 is only half of last year’s, average prices for GCBs sold have risen 11.6% to $1,889 psf from $1,692 one year ago according Listing Sotheby’s Han. She anticipates GCB prices to stay the same or decrease slightly in 2023.

The 5% increase in the additional buyer’s stamp duty (ABSD) in the case of Singaporeans buying their second or following property by the end of December in 2021 prompted buyers to put aside more cash to purchase their property, Han says. “Concerns about the increasing cost of borrowing, the rise in inflation, and the prospect of a recession caused some investors to hold off on buying until the prospects of rate hikes across the globe are more clear.”

New buyers pool
While the economic outlook for the macro economy continues to deteriorate, Singapore stands out as “a secure financial hub with clear and business-friendly legislation and a secure environment for its citizens” According to List Sotheby’s Tay notes. This is evident in the record-breaking number of family office applications that have been filed in Singapore that has seen nearly 900 family offices created in 2022 up as of now, despite the stricter regulations enforced on the Monetary Authority of Singapore, as well as the growth of assets under management as well as the hiring of local executive He also notes.

Tay believes that many are opting for his Global Investor Programme (GIP) which allows applicants who are successful the opportunity to obtain Singapore permanent Residence (PR) Status. “A number of PRs have sought to become Singapore citizen,” he says. “Those succeed in getting Singapore citizenship are likely to want to have a house that reflects their status and needs as a family which is an”GCB.”

The demand for GCBs by 2023 will be encouraged by this emerging market of buyers “alongside locals, particularly younger generations with newly gained wealth, who view GCBs as the ultimate form of homes that are landed and the status symbol, along with spacious living spaces to meet family’s demands” Tay adds. Tay.

Ultra-high net worth (UHNWI) families set to establish a base in Singapore are predominantly from US, Europe and Asia according to Newsman’s Tan. However, those who are who are in this GCB market are mostly originated from China, India and Indonesia Tan adds.

Therefore, as per List Sotheby’s, GCBs that are “priced according to fair market values” determined by the location and characteristics of the land are still sought-after by prospective buyers. “Most of the transactions that were made this year were ones in which the seller was willing to reduce their price expectations in order to meet the buyers’ demands.”

The Newsman’s Tan is in agreement. “Last year, people could afford a premium for an GCB,” he says. “This year, they’re more prudent.”

Move to detached houses
There are more than 2,700 GCBs across 39 gazetted areas currently, and they represent only 25% from the 10761 detached homes in Singapore according to URA information as of 3Q2022.

While transaction volumes on the GCB market is likely to decrease until 2023 William Wong, managing director of RealStar Premier sees activity in the detached home segment remaining to grow.

“The primary reason for the slow trades in the GCB market lies in the larger price difference between buyers and sellers,” says Wong. He estimates that the gap will be somewhere in the 5-% or 10% range.

GCB rates have increased quickly over the past three years that people who were able to find GCBs not affordable have shifted to detached homes with 8,000 sq feet to 12,000 sq ft of land space, as per Wong. This is why the overall cost of detached homes have increased approximately 15% over the entire period of 2022.

Wong predicts that detached homes located in the districts of the prime Districts 9,10, and 11 may cross the threshold of $4,000 psf and houses located in the Katong region in the prime District 15 could reach $3,500 psf.

“The detached home segment appears to be more lucrative than other housing segments that are landed -for instance, GCBs semi-detached homes, detached houses and terraced homes,” claims Wong. “GCB transactions have slowed because of pricing mismatches however, purchasers in the semi-detached or terraced houses are impacted by higher cost of borrowing and interest rates because they use more leverage to finance their house purchase.”

New highs
The prices of detached houses have also risen to new heights. In April of this year an developer has sold a detached home on a 4,370 square foot freehold site on Camborne Road for $15 million ($3,433 per square foot). The record was set for a brand new detached house located in the Dunearn Estate in prime District 11. The report by Wong.

Additionally, in the Raffles Park area, RealStar Premier brokered the sale of a detached home located at Oriole Crescent for $23.5 million, as per an August caveat filed. The current house is located on an undeveloped freehold site with a total area of 10,540 square feet which is why the land price of $2,203 per sq ft is a new mark to be set for the Raffles Park area , which is located in the District 11 area of prime.

Two detached homes in the adjacent Cassia Drive changed owners for $22 million in the year. One of them was a beautifully renovated detached house that is situated on the freehold site that was 9,973 square feet and sold for $2,206 per sq ft in January. The second is on an unfreehold site with 10,625 square feet and sold for $2,071 per square foot in April of this year. Both of them were completed at lower rates for land compared to the detached home at Oriole Crescent.

Concerning terms of GCB markets, Wong expects sales in the first half of 2023 to be slow but to pick up momentum in the 2H2023. Although the overall GCB transactions could decrease by 20% over the course of the year, the market is expected to remain relatively steady, “perhaps even see a slight appreciation by two% up to%” in the coming year, he says.