Good Class Bungalows attracting young and wealthy buyers

Oct 10, 2022

GOOD Class Bungalows (GCBs) are considered by most to be the peak of luxury housing in Singapore, and they continue to attract the wealthy. With only about 2,800 GCB homes in the city-state, they are exclusive and highly sought after, and are a form of wealth preservation. The scarcity of GCBs and their high values are barriers to entry in owning these prestigious properties, also making this asset class all the more desirable to the well-heeled.

The shifting profile of GCB buyers

Traditionally, GCB buyers comprised more mature and successful professionals such as doctors, lawyers and businessmen. In recent years, however, the profile of GCB buyers has expanded to include young entrepreneurs, successful professionals, second or third-generation individuals from old-money families, newly minted wealthy Singapore citizens and parents purchasing GCBs under trusts for their children who are minors.

This expansion is partly due to the burgeoning digital economy leading to the emergence of more young and wealthy tech businessmen. Today’s young and wealthy are typically more willing to splurge on luxurious assets as a display of their wealth and status, resulting in the younger profile of GCB buyers we are seeing now.

Examples of young and wealthy GCB purchasers in their late 20s to early 40s are the chief executive officers (CEOs) of tech companies such as Grab, TikTok, Razer and Secretlab. The GCBs purchased by them include those in Bin Tong Park (S$40 million), Queen Astrid Park (S$86 million), Third Avenue (S$52.8 million) and Olive Road (S$36 million).

Aside from these, other buyers from the new demand pool and the mark they have left on the market in 2022 year to date include the following:

- The highest absolute price transacted for a GCB so far in 2022 is attributed to the purchase of a property at Chancery Lane for more than S$66 million at a land rate of S$1,931 per square foot (psf) by the daughter-in-law of Filipino billionaire Andrew Tan, who is believed to be a Singapore citizen.

- A GCB in Jervois Hill was reported to have been sold for almost S$60 million, or an estimated S$3,900 psf, which is the highest transacted land rate for a GCB in 2022 to date. The purchaser is said to be a Singaporean businessman.

- Another GCB located along Olive Road was sold for more than S$50 million in April this year, translating to a land rate of S$1,800 psf. The new owner of the property is a grandson of the late Singapore property tycoon and hotelier Wee Thiam Siew.

- Most recently, in August, a GCB along Belmont Road transacted for S$55.5 million, or S$2,056 psf. The buyer, who is in his late 30s, is the CEO of private investment company Auric Pacific Group.

GCB market sizzled in 2021, but normalised in H1 2022

Enticed by the price correction during the pandemic in 2020, and emboldened by the recovering economy amid good progress in the national Covid-19 vaccination programme, the expanded group of buyers was out in force in 2021 to shop for GCBs. This drove the GCB market to uncharted heights in 2021. More than S$2.6 billion worth of GCBs changed hands that year, with many transactions sealed at record prices.

GCB land prices have continued to soar in 2022, rising 8.9 per cent between H1 2021 and H1 2022, to average S$1,839 psf. This reflects a recovery of 25.3 per cent from the Covid trough of S$1,468 psf in H2 2020.



However, the relentless rise in GCB land prices has led to a slower, though still healthy, sales volume in 2022. Sales of GCBs fell by more than half on a year-on-year basis to S$750 million for 29 deals in H1 2022, down from the S$1.6 billion for 55 deals recorded in H1 2021.



We do not think that the planned property tax rate hike, with effect from 2023 onwards over two phases, has deterred GCB purchases. The appeal of an exclusive lifestyle, the status of owning a trophy asset and long-term investment gains will likely override concerns over property tax hikes, which the wealthy are expected to comfortably absorb.

Instead, we think that the slower pace of sales in 2022 is partly attributed to the mismatch in price expectations between GCB buyers and sellers. Encouraged by the buoyant demand and price spike in 2021, sellers continue to set bullish price expectations in 2022.

Buyers’ appetite, on the other hand, has been dampened somewhat by the gloomier and uncertain economic and business outlook arising from geopolitical tensions and the resulting inflationary pressures. They have turned more cautious and subdued in their offer prices.

Should GCB sellers maintain their bullish stance and stay steadfast in their aggressive asking prices, the mismatch in price expectations will persist into the rest of 2022 and 2023 to hamper deal-making. This may result in a slower GCB market with less optimistic prices, although the unique appeal of GCBs and Singapore’s position as a safe haven will continue to lure buyers, who are unlikely to be affected by the latest September cooling measures.

Carin Puah is senior director (capital markets) at JLL Singapore, while Sara Ong is research analyst (research & consultancy).

https://www.businesstimes.com.sg/rea...wealthy-buyers