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Published August 28, 2006

Making a quick profit from good class bungalows
Eight such homes resold for 20% gain in past 12 months


(SINGAPORE) Some rich people are getting richer by selling their new Good Class Bungalows (GCBs) for a quick profit.

An analysis of caveats by Savills Singapore revealed that eight such properties were bought and resold at an average profit of about 20 per cent in the past 12 months.

And considering that GCBs now easily cost upwards of $10 million, the investment returns are attractive.

A caveat is a legal document lodged with the Singapore Land Authority by a purchaser to protect his/her interests after an option to purchase is exercised or a Sales & Purchase Agreement is signed.

According to the caveats lodged, one GCB in Peirce Road was bought eight months ago for $4.3 million and resold three months later for $9 million.

Another in Queen Astrid Park was bought for $12.5 million and resold a month later for $16 million.

Steven Ming, director of Savills' GCB arm Prestige Homes, said the number of 'quick sales' has increased since the property market started to pick up but added: 'A point to note is that it does not make up a lot of transactions.'

GCBs are located in designated areas, mostly in District 10, and have to be on a plot of at least 15,000 sq ft. There are about 2,500 such homes here.

Savills' analysis did not include detached houses on plots of less than 15,000 sq ft. As such, it does not include the many new houses coming up at Sentosa Cove or ordinary detached houses that may sit on land as small as 4,300 sq ft up to 15,000 sq ft.

Mr Ming estimated that about 10 per cent of recently transacted GCBs have been bought and resold within a year, with an increasing number bought by permanent residents. So far this year, there have been 68 transactions.

The 'quick sales' - Mr Ming believes 'speculation' is too strong a word - can mostly be attributed to opportunistic selling.

'Some buyers went into the market one or two years ago without anticipating that prices would increase,' he said.

But with his 12-month projection of a further 10-15 per cent increase in prices for GCBs - similar to that for high-end condominiums - more may see GCBs as a lucrative investment.

Giving an insight into GCB buyers, Douglas Wong, associate director of Knight Frank's GCB arm Regal Homes, said the pool of buyers is very small.

'There are probably between 800-1,000 such buyers and many of them own more than one GCB. Some own three to four,' he said.

Mr Wong also believes that 'speculator' is not the right term for these investors. 'They are not really speculators because it's not easy to speculate in this segment,' he said, referring to the big price tags.

Mr Wong, who has been in this market for close to 10 years, believes that these buyers are long-term investors.

Still, he too has seen some 'quick sales' recently, saying that one GCB in the Nassim area was recently sold for $15 million by a buyer who paid $9.8 million for it a year ago.

Perhaps the surest sign that the GCB market is hot must be that the first collective sale could take place soon.

Credo Real Estate is marketing a 26,254 sq ft GCB site in Bin Tong Park, and Credo managing director Karamjit Singh said the owners of the neighbouring GCB are keen to cash out too, so much so that they are prepared to either sell part of their own land or even the whole plot as a 'collective sale'.

The two GCBs combined could yield enough land for a total of three GCBs, so even if the present owners choose to stay, they could sell one house for $11-13 million.

Mr Singh estimated that the potential return on such a development could be 20-30 per cent, 'which is not bad', he said.