Huge wealth creation, high networth PRs cited for hike; smaller gains likely next year
The demand for gracious bungalow living is chugging along quite nicely.
In fact, average prices of Good Class Bungalows (GCBs) are expected to appreciate by about 10 to 15 per cent next year. This appears even more impressive if you consider that this year, they have already climbed by nearly 40 per cent to $710 per square foot of land area.
The expected appreciation could propel the total value of GCB transactions to increase slightly in 2008, although the number of transactions may be slightly lower, Savills Singapore director (Prestige Homes) Steven Ming predicts.
The first 11 months of this year saw a total of 96 GCB transactions adding up to $1.28 billion. The value is an all-time record and has surpassed slightly the $1.24 billion achieved for the whole of last year. However, the number of GCB transactions from January to November this year is still shy of the 118 for the whole of 2006, according to an analysis by Savills Singapore based on caveats data from Urban Redevelopment Authority's Realis system.
'I don't expect the number of GCB transactions to increase next year, because prices have gone up quite rapidly in the past 12 to 15 months. The GCB market is generally restricted to Singaporeans and Permanents Residents with special approval to buy landed homes.
'Some of these potential buyers may have bought GCBs at much lower prices in the past and may take time to adjust to higher prevailing prices now. But having said that, there's been a lot of wealth creation over the past few years as seen in the reasonable number of record prices being set,' Mr Ming said.
Credo Real Estate managing director Karamjit Singh, too, predicts moderate price upside for GCBs for next year, despite forecasting overall flat property prices. 'GCB values will benefit from the enormous wealth created from the economic boom, and the influx of high networth individuals who become permanent residents (PRs), while supply remains scarce,' he adds.
While demand-supply fundamentals remain sound next year for Singapore's real estate sector as a whole, including GCBs, the crucial factor is how the currently-shaky sentiment pans out, Mr Singh said.
Record prices were set for two adjacent bungalows at Nassim Road in the past few months - 32G Nassim Road, which was sold for just under $20 million or $1,504 psf of land in September, followed by 32H Nassim Road in October at an even higher $1,899 psf.
Raffles Education founder and chairman Chew Hua Seng is believed to have picked up 32H Nassim Road, for which he paid $25.5 million. Mr Chew is said to own a few other bungalows nearby.
The prices achieved for 32G and 32H Nassim Road surpassed the previous record for GCBs, of $1,308 psf set only in August this year, when Hong Kong group Wharf (Holdings) sold Glencaird, a conservation bungalow at 15 White House Park, for $28.8 million.
However, market watchers highlight that for the 32G and 32H Nassim Road transactions, each property's land area is just slightly over 1,200 sq metres - lower than the minimum 1,400 sq metres (or 15,070 sq ft) plot size stipulated under Urban Redevelopment Authority guidelines for GCBs. Savills' Mr Ming argues nonetheless that these two properties will be bound by GCB regulations if they were to be redeveloped. This means that they cannot be more than two storeys high, their built-up area is limited to 35 per cent of the total land area, and the plots cannot be subdivided further.
The year has also seen quite a few GCBs being flipped. 21 Cluny Hill was bought for $15 million in January and changed hands again for $20.2 million in June. 46 Mount Echo Park was sold for $10 million in January and again for $12.8 million in March.
'Some savvy bungalow investors with deep pockets, saw value in investing in freehold GCBs earlier this year, when their prices were lagging quite a bit behind those of 99-year bungalows on Sentosa Cove. The gap has since narrowed and these investors have been able to offload their GCB investment for a handsome profit,' Mr Ming said.
Over at Sentosa Cove, seafronting bungalow sites have fetched as much as $1,696 psf this year. These are vacant sites sold by the precinct's master developer, Sentosa Cove Pte Ltd, to buyers to build their dream homes on them.
The supply of completed bungalows for sale in the upscale waterfront housing locale is still limited, but Savills' director of business development and marketing Ku Swee Yong says that owners are asking for $1,800 psf to $2,400 psf depending on the direction they face. 'The main reason for higher bungalow values on Sentosa Cove than in mainland Singapore is because of expedited approval for foreign buyers of landed property on Sentosa Cove. This has been a great draw for those who want to be PRs in Singapore and park a fraction of their wealth here,' Mr Ku said.
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