Sunday, July 31, 2011

GCB slowdown continues with just one caveat lodged for July

GOOD Class Bungalow (GCB) deals have continued to dry up this month following the slowdown seen in the first half of 2011, say agents polled by BT.
So far, just one caveat for a bungalow in a GCB area has been lodged for July - for a property at Andrew Road that sold for $8.88 million, or about $780 per square foot on land area.

However, a few more caveats for deals sealed in July may trickle in over the next few weeks, say market watchers. Among them would be a bungalow at Coronation Road West that was just transacted for $12.6 million (about $1,140 psf).

Newsman Realty managing director KH Tan said: 'We've seen more viewings for GCBs in July compared with June but these have yet to materialise into sales.'

Agents say the last major GCB deal was in June, when a bungalow at Dalvey Road fetched $34 million, or $1,688 psf. It sits on 20,139 sq ft of land.

The seller is understood to be Teng Ngiek Lian, founder of boutique fund manager Target Asset Management.

CB Richard Ellis' analysis of caveats shows that a total 17 bungalows in GCB areas were sold in Q2 this year for $396.8 million. While the dollar quantum is 6.3 per cent higher than the $373.5 million done in Q1 (involving 21 deals), the latest Q2 number is about half the $777.7 million achieved in Q2 last year.

The first half of this year has now seen $770.3 million of GCB deals, down 40 per cent from the nearly $1.3 billion in the same period last year.

However, transacted prices have appreciated. 'While every GCB is unique, for a ballpark comparison based on per square foot of land area, the average price of GCBs sold in H1 2011 is $1,216 psf, an increase of 19.6 per cent over the $1,017 psf for GCB deals in H1 2010,' says CBRE director (luxury homes) Douglas Wong, who specialises in GCB sales.

He attributes the slowdown in GCB deals in H1 2011 to the January 2011 property cooling measures, which introduced stiff seller's stamp duty rates to discourage speculation and lower loan-to-value ratios for property investors.

Mr Wong expects the market to move along at a similar pace in the second half, resulting in a possible full-year 2011 tally of about 60-70 GCBs that may fetch about $1.4 billion-$1.5 billion. This would be a marked slowdown from last year's record showing, when 121 deals were sealed for a total of nearly $2.3 billion.

'Weaker market sentiment resulting from the debt crises in Europe and the US will overshadow the Singapore property market in the second half of this year,' says CBRE's Mr Wong.

RealStar Premier Group managing director William Wong suggests that the second-half figure may even fall below that of the first half. 'This is due primarily to fears that the Singapore government may come up with further property cooling measures which, if implemented, may soften prices,' he said.

Property agents also attribute the current paucity of GCB transactions to a standoff between potential buyers and sellers amid a widening price gap.

AC MacGyver managing director Alex Chua points to a lack of urgency among potential buyers to make a commitment, as most may already own a GCB and are looking for further properties just for investment. 'We still receive offers but the prices are deemed conservative by the sellers,' he said. The lack of urgency to purchase a GCB at this juncture is due to the view that the market may soften. 'But even if the market does soften, most owners are likely to withdraw their properties from the market rather than sell them at lower prices, just like what we saw after Lehman's collapse in late 2008,' Mr Chua added.

Agreeing, RealStar's Mr Wong adds that many GCBs on the market are being offered by parties who may already have sold some of their earlier GCB properties over the past two to three years. 'For these owners, they will only divest any remaining GCBs if the price is irresistible as they don't really need the cash from the sales.'

Market watchers say that another factor discouraging GCB investors from offloading their properties is the difficulty of finding replacement GCBs, given their limited supply, plus the fact that the January cooling measures will apply to any new purchase.

GCBs - an exclusive housing class on mainland Singapore that's governed by stringent planning requirements - typically have a minimum land area of 1,400 square metres (15,069 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 further sub-divided and they cannot be built more than two storeys high.

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