Monday, June 27, 2011

Gap in offer, asking prices widens, GCB sales fall through it

(SINGAPORE) Property agents have been reporting a slowdown in Good Class Bungalow (GCB) transactions as the gap between offer and asking prices widens. However, at least $750 million worth of deals have already been sealed so far this year for this...
(SINGAPORE) Property agents have been reporting a slowdown in Good Class Bungalow (GCB) transactions as the gap between offer and asking prices widens. However, at least $750 million worth of deals have already been sealed so far this year for this ultra-elite segment of the housing market on mainland Singapore. The final tally for the first half can be expected to be higher as more deals are sealed and caveats lodged.

Last year saw a record $2.3 billion of GCB transactions.

The latest deals in Singapore's GCB Areas include a 21,388 square foot plot (bare land which can be developed into a bungalow) in Leedon Park which was transacted for about $29.8 million or $1,395 per square foot (psf) of land area. The buyer is said to be a seasoned Singaporean GCB investor.

A bungalow on Dalvey Road too has been sold this month for $34 million or $1,688 psf while another property in Binjai Park changed hands last month at $17 million or slightly over $1,300 psf. The Swiss Club Road location is said to have seen a transaction recently for $1,150 psf involving a property on land of about 21,670 sq ft, which would amount to nearly $25 million.

Among Singaporeans who bought a GCB this quarter is Enviro-Hub Holdings executive chairman Raymond Ng Ah Hua, who is said to have acquired a property in April on Yarwood Avenue on sprawling land of 69,546 sq ft. At $59.5 million, this is also the biggest GCB transaction so far this year. The price works out to $856 psf. On site is an old bungalow with a tennis court, set amid greenery; the plot can potentially be subdivided for redevelopment into three smaller GCB plots.

CB Richard Ellis director (luxury homes) Douglas Wong, who specialises in GCBs, attributes the slower GCB market this year partly to withdrawal of speculative activity following the introduction of hefty seller's stamp duty (SSD) - of 16 per cent for those who buy a private home on or after Jan 14, 2011 and sell it within a year. The reduction in loan-to-value limit to 60 per cent for those already with an existing housing loan has also affected some GCB buyers who own multiple properties, he added.

'However, prices have remained firm as owners have holding power. In fact, their price expectations have kept on going up due to the limited supply of GCBs. As a result, many owners are not willing to sell unless the price is irresistible,' says Mr Wong. 'Also, if they were to sell their GCBs, they know it will be difficult to find replacement GCBs, plus the January cooling measures will apply to any new purchase,' he added.

Agreeing, RealStar Premier Group managing director William Wong said this situation has contributed to an increase in the buyer-seller price gap. Market watchers expect the slowdown to continue next quarter.

'Owners of some boutique GCBs (on about 15,000 sq ft land area) in prime areas like Tanglin are asking for $2,300- 2,500 psf but the price which buyers are willing to commit now is only $1,800-$2,000 psf,' according to Mr Wong.

A record GCB price of $2,037 psf was achieved in February for 16 Cluny Road.

Newsman Realty managing director KH Tan predicts GCB prices may rise about 10 per cent for the whole of this year.

Savills Singapore executive director and head of prestige homes Steven Ming said: 'While GCB pricing has already appreciated significantly over the past 12-18 months, we could still see some new benchmark prices being achieved over the next few quarters.

'At the end of the day, GCBs are limited in supply, while on the demand side, the buying universe has expanded beyond just the traditional buyers - wealthy Singaporean families, new IPO millionaires, captains of industry and high-flying professionals - to include ultra-high net worth new citizens keen to buy into this exclusive market segment.'

Among the big transactions this quarter is a bungalow on 33,551 sq ft of land in Ewart Park, which is understood to have been bought by a unit of Ng Bok Eng Holdings and some members of the Ng family in May for nearly $38.6 million or $1,150 psf. The late Ng Bok Eng, a philanthropist, was dubbed 'king of cloves',

Joel Lou, director and shareholder of Just Commodity Software Solutions, which provides commodity trading and risk management software solutions, is believed to be the buyer of a bungalow in Oei Tiong Ham Park which was transacted recently for $16 million or $1,188 psf.

The list of GCB transactions brokered by RealStar lately include deals at Dalvey Road, Maple Lane, Yarwood Avenue and Fifth Avenue.

GCBs, an exclusive housing form on mainland Singapore governed by stringent planning requirements, typically have a minimum land area of 1,400 square metres (15,069.50 sq ft). However, when GCB Areas were gazetted in 1980, they included some slightly smaller existing sites. These are still considered GCBs as they would be bound by the other GCB planning rules if they were to be redeveloped. For instance. such plots cannot be subdivided further and they cannot be built more than two storeys high.

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