Published March 23, 2006

Prices for good class bungalows rise 20%
Investors seen buying bungalows for potential capital appreciation


TEN good class bungalows (GCBs) were sold in the first six weeks of this year. The prices were good too, with one particular $10 million bungalow in Ladyhill Road going for $662 psf.

In demand: To be classified as a good class bungalow, the plot size must be at least 1,400 square metres

To be classified as a GCB, the plot size must be at least 1,400 square metres - or 15,064 square feet.

Jones Lang LaSalle's head of research (South Asia), Chua Yang Liang, said that the average GCB price for the whole of 2005 was $375 psf, while for the second half of 2005 alone, it was $394 psf.

With the latest recorded transactions for this year, the average price for GCBs has gone up to $476, an increase of 20 per cent over the figure for the second half of last year.

Dr Chua believes some investors are buying the bungalows not for their rental returns but for their potential capital appreciation.

'While we do not have the absolute number of these buyers, the general market sense is that these are mostly older individuals who believe in holding properties for long-term capital appreciation,' he said.

'I have even heard of older buyers who hold a bundle of such properties that they started collecting some 15 years ago.'

Dr Chua said that the rental revenues from GCBs are generally low. Tenants are usually high net worth individuals, corporations or foreign embassies.

'The risk of these properties are generally low and the returns are reflective of this risk,' he said.

The level of speculation in GCBs may not be as high as in other property segments but there does appear to be some. Dr Chua said he has come across a large GCB property in Swettenham Road that had been 'flipped' three times last year with the price going up each time.

'There are substantially more transactions involving GCBs with large land area since these properties generally can be sub-divided into smaller GCB lots fetching prices within the range that is most affordable for new entrants to the market,' he said.

'Fifteen per cent of GCB transactions in 2005 were of large property parcels that are capable of subdivision.'

And there could be an increase in foreigners buying too. According to caveats lodged, 15 per cent of the buyers of GCBs were permanent residents.

Dr Chua believes the proportion of foreign buyers could rise.

'Coupled with the recent relaxation of foreign ownership of landed homes in Singapore, foreigners with Land Approval Dealing Unit approvals will be expected to fuel the increase in demand for GCB plots,' he said.