Published October 09, 2012

Good Class Bungalow activity dips in Q3

Lull expected to persist until next year, says a major GCB agent

By Kalpana Rashiwala

Prized real estate: A freehold bungalow in Margoliouth Road, off Stevens Road, changed hands last month for $20 million. - PHOTO: ARTHUR LEE

[SINGAPORE] The volume of deals in Good Class Bungalow Areas (GCBAs) slipped in the third quarter, based on a preliminary analysis of caveats by CBRE Research.

Between July and September, 14 such properties changed hands for a total $285.1 million, down from 18 transactions at $358.8 million in Q2.

Last Friday's announcement by Monetary Authority of Singapore (MAS) restricting the tenure for housing loans and lowering loan-to-value (LTV) limits for long-tenure loans to property investors is not expected to have a major impact on GCB buyers, who are typically ultra-rich Singaporeans.

However, at least one major GCB agent predicts a slowdown in activity this quarter, as buyers and sellers wait to assess the impact of the new measures.

RealStar Premier Group managing director William Wong said: "As with any new government measures, there'll always be an impact in the short term - one to three months. But the effect of this measure seems to be marginal on the GCB market, compared with past measures."

He expects sales to pick up again next year, starting in the second quarter.

Mr Wong and other GCB agents told BT that even before MAS's announcement, banks were generally giving loans of only 50-60 per cent of valuation for GCBs, against loans of up to 80 per cent for the general housing market.

Starting last Saturday, MAS lowered the LTV limit to 40 per cent for borrowers taking housing loans exceeding 30 years or loans extending past their retirement age (65 years), where these borrowers have one or more outstanding housing mortgages.

A 10-20 percentage point drop in LTV, while amounting to between $2 million and $4 million on a $20 million bungalow purchase, is unlikely to make much difference to most buyers in this group, said Samuel Eyo, director of prestige homes at Savills Singapore. He said: "GCB buyers are typically high net worth Singaporeans. They tend to be prudent and gear conservatively - if they gear at all - on a big-ticket investment like a GCB."

Among recent bungalow deals in GCBAs is one for a property in Gallop Road, which was sold for $28 million or $1,874 psf on a freehold plot measuring 14,940 sq ft. The two-storey house, completed a few years ago, has a basement large enough for at least five cars; it also has six bedrooms, a guest room and a swimming pool. Its built-up area is around 10,000 sq ft.

The bungalow is being sold by boutique developer and investor Satinder Garcha. The buyer, represented by RealStar, is believed to be a currency trader who recently sold a GCB in Oriole Crescent. Both he and the seller, represented by Newsman Realty, are Singapore citizens.

A freehold bungalow in Margoliouth Road, off Stevens Road, changed hands last month for $20 million, or at $1,572 psf on land area of around 12,725 sq ft.

The sellers are understood to be descendants of the late Ong Chin Chio, also known as Ong Tjhio, the founder of the Ongco group, one of Singapore's biggest unlisted financial and trading businesses.

A bungalow along Cassia Drive, sitting on 11,195 sq ft of land, sold for $18.33 million or $1,637 psf; other transactions in Q3 include a bungalow in Peirce Hill, which fetched $23.80 million or $1,570 psf.

GCBs typically have a land area of at least 15,069.46 sq ft, but when GCB Areas were gazetted in 1980, they included some smaller existing sites that still made the cut as GCBs as they would be bound by other GCB planning rules if they are redeveloped.

RealStar's Mr Wong describes the slowdown in GCB sales in Q3 as a lull following pent-up demand seen in Q2, when "a lot" of good units were sold, he said. The Q2 showing reflected a recovery from Q1, when nine bungalows totalling $223.8 million were sold. The Q1 performance was affected by a knee-jerk reaction to last December's introduction of the Additional Buyer's Stamp Duty as well as the usual slowdown in sales during the Chinese New Year festivities.

CBRE director of luxury homes Douglas Wong, who specialises in GCB sales, was hard-pressed for a specific reason for the Q3 slowdown in GCB sales; he suggested, however, that the punitive seller's stamp duty (SSD) regime introduced in January 2011 could have had a residual effect.

"The SSD basically wiped out speculators and short-term traders from the GCB market. Today, buyers are owner occupiers and very long-term investors," he said.

The GCB sales tally for the first nine months of the year is 41 deals ($868 million), said CBRE. Mr Wong expects the current cautious momentum to continue this quarter and into next year, as sentiment will be affected by the situation in Europe and continued uncertainty in the global economy, notwithstanding QE3.

He said: "Assuming we see three to four GCB deals a month in Q4, we could end 2012 with 50 to 55 transactions totalling $1 billion to $1.1 billion."

This would be close to last year's performance, when 57 deals ($1.16 billion) were transacted. Last year's figures were a plunge from 2010's, during which 133 sales involving $2.38 billion were inked.

Mr Eyo expects GCB prices to hover around current levels. "There's not much impetus for price movement next year, except for properties in super-prime locations like Nassim Road, where buyers may have to be prepared to pay top dollar to persuade owners to part with prized-real estate."