Good Class Bungalows’ appeal is not dented despite property curbs

A report by Bloomberg said that Good Class Bungalows’ appeal is not dented in Singapore despite the property cooling measures introduced last year. The report referred to the recent purchase of GCB by Tony Tung (chairman of Hong Kong-based oil trader Winson Group), and the fact that several other GCBs are in the property market, to arrive at that conclusion.

The report quoted Sammi Lim, director of capital markets at real estate agency CBRE Group Inc as saying, “Due to scarcity and exclusivity, the GCB market has always been regarded as the jewel of the residential market and a coveted trophy asset to the well-heeled community. GCBs have proven to be a resilient asset class through market cycles.”

The Urban Redevelopment Authority (URA) has gazetted 39 good class bungalow areas, which are the pinnacle of Singapore’s landed housing segment. The URA has stipulated strict planning conditions for good class bungalows to preserve their exclusivity and low-rise character. URA also requires good class bungalows to have a minimal plot size of 1,400 sq m or 15,069 sq ft – but those with land plots smaller than the stipulated size when the 39 good class bungalows areas were gazetted in 1980 are still classified as as such.

All these exclusivity adds to the Good Class Bungalows’ appeal.

The buyer pool for good class bungalow is small and that new citizens who were originally from China, were prominent buyers of such exclusive property. Besides the new citizens, buyers of good class bungalows also comprised of Singapore corporations, ultra-high-net-worth Singaporean families and Singaporean entrepreneurs in their 40s. Coveted address, prestige, exclusivity, wealth-preservation quality and measure of their financial success, were all reasons for such buyers to seek good class bungalows.

Despite the restricted demand pool, prospective sellers are expected to raise or be firmer on their price expectations in 2019. This is because sellers are mindful that good class bungalows will further enhance the wealth preservation quality for the buyers. But the prices of good class bungalows are expected to be tempered by Additional Buyers’ Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) requirements.

A recent report by List Sotheby’s International Realty (List SIR) however, cast a pall over the Good Class Bungalows’ appeal.

The List SIR report said Singapore’s luxury property segment, which includes Good Class Bungalows, saw a 42 per cent drop quarter-on-quarter. It pointed out that the local luxury property segment as a whole took a hit after the property cooling measures with 13 Good Class Bungalows (GCBs) being sold along with 1 bungalow in Sentosa Cove and 61 luxury apartments.

This is a drop of 42% from the 8 GCBs, 4 Sentosa Cove bungalows and 119 luxury apartments sold in Q2 2018. List Sotheby’s said these figures show that the cooling measures have a greater impact on the luxury property segment of Sentosa Cove and luxury apartment segments than on the GCB segment.

The reduced sales in the first 2 luxury property segments could be attributed to a drop in foreign and permanent resident (PR) buyers who are hit by the higher ABSD rates, said the niche real estate services company.

The report however noted that the Good Class Bungalows’ appeal remain somewhat resilient as they are restricted properties which only locals can buy.

An earlier report by List Sotheby’s noted that in recent years, GCB buyers tend to be families who are upgrading from smaller bungalows, Singaporean entrepreneurs in their late 30s as well as newly-minted high-net-worth (HNW) citizens. This group is likely to continue to support the GCB market in the luxury property segment.

Paul Ho, chief mortgage consultant at iCompareLoan, said that the Good Class Bungalows’ appeal remained intact because they are seen as good value proposition because prices are now at attractive levels and the stock of such homes remains limited.

“Singapore mortgage loan interest rates are one of the lowest among developed countries and we also have an active resale market. All these factors will add to the the Good Class Bungalows’ appeal,” he said.

“The Singapore property market is a more affordable option for real estate investments, especially when compared to other major global cities,” Mr Ho added.

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