The Good Class Bungalow (GCB) market – the creme de la creme of the Singapore landed residential property market, at least on the mainland – has seen nearly 100 transactions worth a total of $1.6 billion in the first 11 months of this year.
The numbers, based on analyses of caveats by CB Richard Ellis (CBRE), are almost double the 51 deals valued at $827 million for the whole of last year.
The value also surpasses the full-year record for total value transacted of $1.23 billion set in 2006. But the number of deals so far this year is still shy of the record 119 set in 2006.
Credo Real Estate estimates GCB prices could have risen 5-10 per cent this year and projects a further 5-15 per cent appreciation in 2010. ‘Current GCB prices are not far off the peak levels established between mid-2007 and mid-2008,’ says the company’s managing director Karamjit Singh.
Sentiment in the GCB market is tipped to remain firm next year on the back of Singapore’s economic growth, and as the country attracts more high net worth new citizens.
However, some observers expect a slight easing in transactions as the strong pool of demand seen earlier this year has been substantially sated following a year of brisk sales.
CBRE director (luxury homes) Douglas Wong predicts 80-90 GCB deals next year worth a total of $1.2-$1.4 billion.
William Wong, managing director of RealStar Premier Property Consultant, also sees an easing in the number of GCB deals in 2010. ‘Demand is still strong, but the pool of buyers right now is not as big as, say, earlier this year. Most of those who wanted to buy a GCB have already bought this year, so demand has been substantially satisfied for now,’ he says.
‘Of course, the buying pool may expand again, for instance, as more high net worths from overseas become Singapore citizens.’
An upbeat Mr Singh declares: ‘Demand for GCBs is poised to remain robust as Singapore’s economy begins to grow again and the rich get to feel richer. GCBs are also popular investment tools played by seasoned high net worth individual investors when they smell capital appreciation potential.’
CBRE’s analyses of caveats data captured by URA Realis and SISV Realink as at Dec 11 show that 99 transactions worth a total of $1.58 billion have been done so far this year in GCB areas.
But with caveats yet to be lodged for any deals this month as well as some of November’s transactions, some industry watchers estimate the actual year-to-date tally could be closer to $1.7 billion, if not higher. There’s also talk of a few buyers choosing not to lodge caveats, perhaps to keep a low profile, although this can happen only if they’ve not taken a mortgage.
July was the busiest month this year with 23 deals done for $356 million. CBRE says 2009 has seen 20 GCB transactions at $20 million apiece and above, up from 12 in 2008, nine in 2007 and four in 2006. The number of GCB deals priced at $1,000 per square foot of land area and above has also risen from zero in 2006 to nine in 2007, 12 in 2008 and 24 in 2009.
This year’s strong showing was due to buyers deciding to make a commitment before prices increased further – when a price dip they had been hoping for earlier in 2009 did not materialise, says CBRE’s Mr Wong. This was amid a sudden improvement in property market sentiment when the stock market posted a stunning recovery.
Analysts also say a general distrust of financial instruments following the global financial crash has enhanced the appeal of GCBs to the well-heeled.
‘They’re evergreen investment products that would always be preferred by ultra-high net worth individuals. GCBs are limited in supply – the existing stock is about 2,400 – in an urban environment where landed housing is scarce. So there’ll never be an oversupply situation for GCBs. Most owners have strong holding power, reducing the risk of falling prices in a downturn,’ says CBRE’s Mr Wong.
Mr Singh says most buyers these days already own existing GCB properties and tend to trade in them. ‘There are also a handful of buyers seeking to upgrade from smaller landed properties or large apartments. The third category of buyers are new PRs and citizens, who qualify to own landed properties.’
Says CBRE’s Mr Wong: ‘About four, five years ago, the typical age of a GCB buyer would be in the mid-40s, but these days it would not be unusual to have a GCB buyer in the late 30s. Young professionals and entrepreneurs and PRs have been showing keen interest in the GCB market,’
In Singapore, foreigners need permission from the Land Dealings (Approval) Unit (LDAU) before they can own landed property.
On mainland Singapore, the main criteria are whether the foreigner is a Singapore PR and his or her economic contribution to Singapore. However, non-PR foreigners may buy landed homes on Sentosa Cove subject to LDAU approval.
Whether on the mainland or on Sentosa Cove, the landed home a foreigner is allowed to buy usually must not exceed 15,000 square feet in land area.
Source: Business Times, 17 Dec 2009
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