GCB transactions fall amid widening price gap, weak sentiment on multiple fronts

GCB transactions fall amid widening price gap, weak sentiment on multiple fronts

The 9 deals so far in Q2 totalling S$224 million are not even a third of Q2 2021 numbers

Jun 23, 2022

TRANSACTIONS have fallen dramatically in the Good Class Bungalow (GCB) market, amid a widening buyer-seller price gap, coupled with weak sentiment in recent months from the stock market, cryptocurrency, macroeconomic and geopolitical fronts.

List Sotheby’s International Realty’s (List SIR) analysis of URA Realis caveats data downloaded on Jun 21 showed that so far this quarter, there have been 9 deals in GCB Areas totalling S$224.20 million (with the latest deal dated Jun 10). These figures are not even one-third of the 31 transactions that amounted to nearly S$900 million in Q2 last year.

Year to date, the tally stands at 24 transactions adding up to S$624.54 million - or less than half the 55 deals totalling nearly S$1.6 billion in the first half of last year. Bungalows in GCB Areas are the creme de la creme of Singapore’s landed housing market.

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Even prior to Russia’s invasion of Ukraine in February and the Federal Reserve starting to raise interest rates in March, GCB market watchers had predicted towards the end of last year that the volume of deals will ease in 2022. First, the rapid surge in transacted GCB prices had resulted in a mismatch in price expectation between buyers and sellers.

Moreover, following the record S$2.57 billion of GCBs transacted in 2021, much of the supply available for sale had been taken off the market. Or as veteran GCB agent KH Tan, managing director of Newsman Realty, puts it: “There aren’t many good listings in the market now after a lot of the better properties were sold last year.”

The 90 transactions in 2021 was double the 46 in 2020.

Perennial CEO buys a GCB

One of the bigger transactions recently is that of an old 2-storey bungalow along Andrew Road in the Caldecott Hill Estate GCB Area. A caveat was lodged for this property this month at S$33 million or S$1,225 per square foot on the freehold land area of nearly 27,000 sq ft. The family of Perennial Holdings chief executive Pua Seck Guan is buying the property with a view to redeveloping the site for their own occupation.

The bungalow is just opposite the sprawling 752,015 sq ft site of Mediacorp’s former Caldecott Broadcast Centre that Perennial and its major shareholder, Kuok Khoon Hong, clinched in late-2020. The owners are expected to start selling bungalows on the site next year.

List SIR’s data show that the average transacted price of bungalows in GCB Areas year to date is S$1,817 psf on land area, up 7.4 per cent from the whole of last year. The 2021 average price of S$1,692 psf was 14.6 per cent above the 2020 level. However, these average psf prices do not take into account differences between bungalows such as their location, age/condition, built-up area, orientation and other attributes, said Han Huan Mei, research director at List SIR.

On a like-for-like basis, Newsman’s Tan estimates that in H1 2022, generally GCB prices in most locations have remained the same, after appreciating significantly by about 25 per cent in 2021. “Prices are likely to maintain at current levels for the rest of this year,” he added.

William Wong, founder of Realstar Premier, too said that “prices for the first half of this year have kind of stabilised compared with last year” and expects this to continue in H2 2022. “Most buyers are not prepared to pay a premium at the moment.”

Tan added: “It looks like the volume of transactions in the second half of this year will remain low, based on the current factors in play.”

List SIR’s Han predicts that 2022 could end with about 50-60 deals in GCB Areas, much lower than the 90 seen in 2021. The total transacted value for GCBs this year could be S$1.3 billion to S$1.5 billion - some 40-50 per cent below last year. “With inflationary pressure and global uncertainties, it is likely that activity in the GCB market will remain at the current momentum for the rest of the year,” she added.

New attractions

Market observers note that one factor that could stimulate activity is if new listings for attractive properties were to come on the market. A potential example could be the 3 old freehold bungalows in Nassim Road held by Singapore Press Holdings, which has been delisted. Besides their prime Nassim Road address, these properties are seen as nice redevelopment sites, with flat or slightly elevated land and wide road frontage. “Moreover, with land areas of about 15,130 sq ft to 15,540 sq ft, their respective absolute price quantum will not be too high and appeal to a wider pool of potential buyers. And that is if SPH decides to sell,” said a market watcher who declined to be named.

With the GCB market taking a breather, sellers have been adjusting their strategies. “I can see most of the owners are not desperate to sell; they’ll just wait for the right offer,” said Newsman’s Tan.

Agreeing, List SIR executive director Lewis Cha said: “Some sellers prefer to withdraw their properties from the market, choosing instead to offer them more discreetly to seek the best offers from potential buyers. In the interim, they can lease their properties at attractive rentals of S$100,000 to S$200,000 per month for some of the larger GCBs in prime locations and in well-maintained condition.”

Knight Frank Singapore’s executive director of capital markets, Mary Sai, said that “to acquire a GCB now would require a robust premium to prise sellers into accepting offers, given that most owners have overly optimistic price expectations”.

In a similar vein, Realstar Premier founder William Wong said: ”Most sellers are still very much of the view that prices will stay firm and appreciate over the years due to more family offices being set up lately and more ultra high-net-worth individuals residing here, some of whom may be getting Singapore citizenship soon. These will form a new pool of buyers going after GCBs.” (One generally has to be a Singapore citizen to be allowed to buy a landed property in a GCB Area.)

Added Wong: “Given their conviction that demand will still be high, these owners will not compromise to let go of their GCB unless it is at a price close to their expectation.”

As for potential buyers, some are waiting to see if prices will retreat due to the overall weak macroeconomic conditions. Knight Frank’s Sai observes that ”buyers have become increasingly selective in their choice of location and will only commit to the right GCB”.

Bungalows in the 39 gazetted GCB Areas are the most prestigious form of landed housing in Singapore, with strict planning conditions stipulated by the Urban Redevelopment Authority (URA) to preserve their exclusivity and low-rise character.

The URA has stipulated a minimum plot size of 1,400 square metres (about 15,070 sq ft) as the planning norm for newly-created bungalows in GCB Areas. However, when these areas were gazetted in 1980, they included some smaller existing sites; these are still bound by the other planning rules for GCB Areas if they were to be redeveloped.

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