Singapore’s Good Class Bungalow Market Down but Not Out
The sales of Good Class Bungalow Area homes will reach a new low in 2023. But buyers are still waiting for the sellers to lower their prices.
Most Singaporeans want to own a land-based home, because it is associated with prestige and status. It also helps to plan for the future.
In land-starved Singapore, the scarcity of large houses on large plots of land gives this type of housing a lot of value. Singapore has a landed property population of only 5%, with the rest living in condominiums or apartments. 78 % live in public housing.
The Urban Redevelopment Authority’s (URA) data for the last five years (2019 – 2023) revealed that every year, between 1,300 to 1,800 land homes were sold.
The year 2021, however, was a notable exception. Sales volume in that year was a staggering 3,080 units. After the Covid-19 pandemic, people realized that they needed more space to accommodate larger families who were learning and working from home.
The year 2023 had the lowest volume of sales.
Singapore’s residential market faced several challenges in 2023, from global macroeconomic and geopolitical factors to cooling measures for property and a high profile money laundering arrest on local soil. In 2023, only 1,268 landed properties were transacted. This is down from 1,681 landed homes in 2022.
Despite lower sales, the landed home price per square foot (psf), continued to rise. The detached house price rose by 8.4% to S$1,699 per square foot (psf), the semi-detached house price rose by 12.4% to S$1,678 per sq.ft. and the terrace house price rose 9.4% to S$1,888 per sq.ft.
GCB sales slow as prices rise
The detached houses located in Good Class Bungalow Areas (GCB) are at the top of the landed home market. GCBs, which are detached homes with large plots of land, are protected by strict planning regulations to maintain their exclusivity and low rise character. The URA has gazetted 39 GCB Areas, including Nassim Road and Whitehouse Park. Around 2,700 detached homes are located in these GCB Areas, and it is expected that this number will remain the same over the long-term.
The 18 GCB transactions in 2023 represented the lowest annual sales volume since 1996, when URA first released the statistics.
Luxury market has been hit by the deteriorating sentiment caused by global economic uncertainty, increasing interest rates, cooling measures for property in April, and anti-money laundering raids conducted in August.
They also resisted because they thought the asking price was too high. Buyers were unwilling to pay more unless the house met all their criteria, such as the site, the design, the finishes, or the rarity of the plot.
The average price of GCBs increased by 30 percent in the four-year period from 2020 to 2023. It went from S$1,477 per square foot to S$1,924 per square foot.
Rents and crazy deals
Four significant GCB transactions at Nassim Road that were reported in the media and completed in March-April 2023 are not included in the 18 GCBs that appeared in caveats last year. These deals were not caveated.
Cuscaden Peak Investments sold a portfolio of three GCBs to the Fangiono Family behind Singapore-listed palm producer First Resources for a sum total of S$206.7 Million (S$4,500 psf). A member of the Fangiono Family had also purchased a GCB a little further down the road, for S$88,000,000 (S$3,917 psf). These deals would have driven the average price even higher (psf).
Rents have risen dramatically in recent years, and this has created a fascinating phenomenon on the GCB Market. Some bungalows were being rented at more than S$100,000. Tenants paid three years’ rent or even longer in advance. In 2021 and 20,22, three bungalows were rented out for more than S$100,000. In 2023, four bungalows were leased at this price.
The party was largely over after the arrests of several “wealthy residents” in August 2023.
Several bungalows are now for rent. Owners of these properties now take longer to find new tenants, even at rents that are more realistic. This is due to the stigma attached to former occupants. By 2023’s fourth quarter, the asking rents of GCBs will have declined by at least 30%.
What is the future of the bungalow market?
The outlook for 2024’s bungalow market is still somewhat clouded. Due to the increase in Additional Buyer Stamp Duty in December 2021 and in April 2023, we observed that the majority of GCB buyers were Singaporeans and newly naturalised citizens buying their first home for owner occupation. They were mostly professionals and businessmen between the ages of 30 and 40.
It remains to be determined how many new multimillionaires are willing to support this sector in light of the current uncertainty and the consequences of the conflict between Israel and Hamas and the war in Ukraine.
Second, property tax rates will increase for owners of luxury properties. Property tax rates for owner-occupied homes have increased from 4 to 23% in 2023 to 4 to 32% in 2024.
Rates for properties that are rented have increased from 11 to 27% in 2023 to between 12 and 36% in 2024.
On the one hand, a higher tax burden could lead some owners sell their bungalow. A potential buyer who originally intended to purchase a GCB in order to earn high rental income may decide it’s no longer worth the investment.
All these factors will lead to a slowdown in sales and a moderated price level for the first half 2024.
We are also aware that buyers are waiting for the sellers to lower prices. The sales momentum will improve and prices will stabilize.
