GCB segment ends 2020 on high note; buoyant mood expected to continue

Updated from : The Business Times, 24 Dec 2020

THE Good Class Bungalow (GCB) segment appears poised for further increases in transaction volumes and prices, even after ending 2020 on a high note. Going by the viewing activity underway, agents whom The Business Times spoke to are sanguine about prospects for 2021.

Veteran GCB agent KH Tan, managing director of Newsman Realty, said: “In the past four months, we’ve seen a pick-up in viewings for GCBs by UHNW (ultra-high-net-worth) foreigners who have at least one family member that has become a Singapore citizen in the past one and a half years or so.” In addition, the woes in Hong Kong have led many wealthy Asian families to increase their exposure to Singapore instead, he said.

William Wong, the founder of Realstar Premier, also sees newly-minted citizens as a driver of GCB demand over the next two years. His agency, which was set up in 2001, has had a bumper year – brokering 16 GCB deals (including seven co-broke deals with other agents) with a total transacted value of S$439 million.

Mr Wong said that GCB sellers may have differing views on where the market is heading next year.

“Some sellers will price their properties more realistically to cash out. They may think, for instance, that post-Covid, the reality will set in and the economy may not be so good; so if an offer comes close to what they want, they will exit,” he said. Meanwhile, even optimistic sellers are able to find buyers for GCBs “in prime locations and on a large land plot”.

He expects the number of GCB deals to increase by about 20 per cent in 2021 compared with this year. The year-to-date tally, based on URA Realis data downloaded on Dec 22, stands at 40 transactions (with the latest transaction dated Dec 11). The figure for the whole of last year was also 40.

List Sotheby’s International Realty (List SIR) executive director Lewis Cha, too, thinks it is possible for 2021 to see a higher number of deals. “There are still bungalow seekers who are actively viewing properties. Although the economy is not out of the woods, market sentiment has improved as some industries – pharmaceuticals, e-commerce, tech and telcos – have done well and the stock market has recovered some lost ground.”

Although the number of GCB deals to-date matches that for 2019, the total transaction value is S$893 million – up 14 per cent from the S$782 million for 2019.

And their prices have appreciated.

“More buyers are prepared to pay a premium for prime locations. Within such areas, the pool of buyers for bungalows with bigger land areas has expanded,” said Realstar’s Mr Wong.

Given the scarcity of brand-new GCBs in highly sought-after locations, buyers are prepared to pick up older properties for redevelopment – even though construction costs have gone up, he added. “Some of the GCBs in the prime locations are hitting around S$2,000 per square foot for land alone.”

Among the most recent deals that Realstar is understood to have brokered was a bungalow in Chatsworth Park, which went for S$44 million or S$2,082 psf based on the land area of 21,133 sq ft. The buyers are expected to redevelop the property.

Data for Q1 2021 could continue reflecting this trend of higher prices as some options to purchase GCBs at relatively high prices were granted in Q4 2020, but they have yet to be exercised. Realstar, for instance, has four existing deals with options that only need to be exercised by next year. (These are part of its 16 deals this year.)

Mr Wong forecasts that prices in prime areas such as Cluny, Dalvey, Chatsworth and Tanglin may go up by 7 per cent in 2021, following a 5-7 per cent gain this year.

“In the not-so-prime areas such as Brizay Park, Old Holland Road, the Binjai and Yarwood areas, prices are likely to rise 3-5 per cent in 2021 after going up 2-3 per cent this year.”

Newsman’s Mr Tan said he expects GCB prices in ultra-prime locations such as Nassim and near the Botanic Gardens to rise 10-15 per cent next year, after appreciating about 10 per cent this year.

Bungalows in the 39 gazetted GCB Areas are the most prestigious form of landed housing in Singapore, with strict planning conditions stipulated by the Urban Redevelopment Authority (URA) to preserve their exclusivity and low-rise character. While anyone can buy a non-landed private home in Singapore, one generally has to be a Singapore citizen to be allowed to acquire a landed property in a GCB Area.

Besides new citizens, wealthy local families continue to pick up GCBs for their children and grandchildren, said Newsman’s Mr Tan. List SIR’s Mr Cha added that local buyers of GCBs also include the newly rich whose businesses have benefited from the current crisis. “Some are buying their first bungalow for their own occupation.”

Mr Tan said the influx of foreigners setting up family offices here bodes well for GCB demand in the medium term. Eventually, some of their family members may become Singapore citizens and thus qualify to buy a bungalow in a GCB Area. “This has boosted local buyers’ confidence in the Singapore property market. Also, considering the very limited supply of GCBs, this has spurred some of those waiting on the sidelines to make their move,” he said.

A critical factor that has helped to seal GCB sales this year is a narrowing price gap. Mr Tan said around mid-year, as Singapore was emerging from the “circuit breaker” to contain the spread of Covid-19, some owners began moderating their asking prices.

According to List SIR research director Han Huan Mei, sentiment improved in Q3 and GCB investors began making offers that were close to or matched sellers’ price expectations.

Mr Wong of Realstar said his agency was also able to seal some deals with the help of technology. Its mobile application StarApp2 allows an agent to show a prospective buyer information, specifications and visuals of nearly all the GCBs that are on the market and within a radius of the buyer’s preferred location.

The final tally of transactions in GCB Areas for 2020 as captured in the URA Realis database may rise if more caveats are lodged in the next few weeks by buyers who have either recently exercised options to purchase properties or who are due to exercise options by year-end, say analysts.

The URA Realis database does not capture the full list of transactions in GCB Areas since it excludes transactions for which buyers do not lodge caveats. Also excluded are transactions of vacant land.

At least S$467 million of transactions in GCB Areas were not reflected in URA Realis last year, going by industry estimates.

The figure so far this year is at least S$325 million. There are also at least S$160 million of GCB deals for which options were granted this year but which are due for exercise by next year; this will provide a good start to 2021’s GCB transaction numbers.

This year’s biggest GCB transaction in absolute price terms, though not caveated, is that for a bungalow in Garlick Avenue, which was bought by the family of billionaire Goh Cheng Liang for about S$93 million.

The property, with a freehold land area of 101,550 square feet, was sold by some members of the Lee family of the Thye Hong group, which used to make biscuits.