Singapore Residential Luxury Bungalows

Luxury Homes H1 2017

Good Class Bungalows

Good Class Bungalows (GCBs) are touted as the most coveted type of housing in the Singapore residential market. All GCBs have freehold tenure. Urban Redevelopment Authority (URA) has indicated that there are about 2,800 plots in 39 gazetted Good Class Bungalow Areas (GCBAs). While most of the GCBAs are located in three of the traditional prime districts (10, 11 and 21), two others are found outside the prime districts at Chestnut Avenue in Bukit Panjang (district 23) and Windsor Park in Upper Thomson (district 20).

Since they were gazetted in the 1980 Master Plan, the 39 GCBAs have remained largely the same and currently, the government has no plans to create new GCBAs.

According to URA planning guidelines, the minimum land size of each GCB is 1,400 sq. m. or about 15,070 sq. ft. GCBs are subjected to a height restriction of two storeys although an attic and basement may be allowed.

In addition, there are special planning parameters for site coverage control and building setbacks to ensure enough open space around each bungalow and to protect the existing exclusive environment of these established bungalow areas. However, not all the bungalows in the GCBAs are of the same size, age, architectural design and built-quality. Based on these factors, each GCB commands different price tags ranging between $10 mil and $50 mil.

GCBs are classified as “restricted properties” and only Singapore citizens are allowed to buy the landed properties in GCBAs.

Sentosa Cove Bungalows

In contrast, foreigners are allowed to buy and own landed properties – including bungalows – at Sentosa Cove, although government approval is required. The application for approval process for foreigners to buy landed properties at Sentosa Cove has been fast-tracked, some to just a few days.

Conceptualised by the government in the 1980s, Sentosa Cove was designed to be a prime residential zone on the resort island of Sentosa. Sentosa Cove covers an area of 117 ha on the eastern side of Sentosa Island, and in addition to the main residential area are five man-made islands called Coral Island, Paradise Island, Treasure Island, Sandy Island and Pearl Island. Most of the land is designated for residential accommodation, with the five islands reserved for bungalows. The non-residential developments within Sentosa Cove are a private marina (One°15), a retail cum F&B complex (Quayside Isle) and a 320-room hotel (W Singapore Sentosa Cove).

As at 2015, there are around 2,160 homes in Sentosa Cove, and condominiums made up approximately 80%. About 400 units are bungalows. Although all residential homes are of 99 years leasehold tenure, there is always a healthy interest in Sentosa Cove’s bungalows because of their exclusivity, limited supply and eligibility for foreigners to own them. Similar to the GCB market, there are currently no plans to increase the housing supply in Sentosa Cove.

Stirrings In The Luxury Market

Interest in GCBs and the bungalows at Sentosa Cove picked up in the first half of 2017. Based on caveats lodged, 20 GCBs and seven bungalows at Sentosa Cove have been transacted compared to 14 GCBs and none at Sentosa Cove over the same period in 2016. At this pace, the GCB market in 2017 could perform better than in 2016 which clocked in a total sales volume of 37 GCBs. As for Sentosa Cove, the bungalow market has already outperformed the 2016 sales volume.

The pickup in interest in such luxury bungalows could be attributed to two reasons: Firstly, there was a general improvement in market sentiment since the beginning of the year. This was reflected in the strong take-up of recent new launches, as well as completed projects which developers were actively marketing through innovative financial packages. Secondly, the gradual price corrections over 14 quarters which have brought prices, particularly that of luxury homes, to more realistic levels. Astute investors who have been waiting on the side-lines have started to enter the market since Q2 2016.

Based on caveats lodged, the 20 GCBs that were sold in H1 2017 amounted to an investment value of $432.21 mil or $1,242 psf on land area. This compares with the value of $298.36 mil or $1,318 psf for the 14 GCBs sold in the same period in 2016. The most expensive GCB sold in 2017 was a 29,708 sq.ft-property at Queen Astrid Park which was transacted at $46.00 mil or $1,548 psf. In 2016, the highest price of $56.58 mil or $1,556 psf was achieved by a 36,365 sq.ft-property at Nassim Road.

Granted that every GCB is unique in terms of location, size, design, age and quality, the transactions in 2017 are evidence that astute investors are entering the market amidst softening prices.

As for the transactions in Sentosa Cove, the seven bungalows sold in H1 2017 totalled $102.65 mil or $1,555 psf on land area, compared to the four bungalows that were sold in the whole of 2016 at $64.50 mil or $1,881 psf on land area. Notably, in 2017, the highest price of $21.25 mil or $1,886 psf was for bungalow at Lakeshore View with a land area of 11,270 sq. ft. whereas in 2016, a 9,580 sq. ft. bungalow located at Ocean Drive achieved a record price of $28.00 mil or $2,923 psf. Again, this shows savvy investors re-entering the Sentosa Cove market after staying away for the past three years. It is a signal that buyers are seeing good value at the current pricing levels.

In terms of the profile of buyers, it has been reported that some of the GCBs were purchased by foreign nationals who had become Singapore citizens. Likewise, some of the buyers of the bungalows in Sentosa Cove could be new citizens, although foreign ownership is allowed.

While the Additional Buyer’s Stamp Duty (a tax imposed on foreign buyers or buyers of multiple residential properties in Singapore) remains, luxury homes in Singapore look attractive to foreign high-net-worth individuals as compared with countries like Hong Kong and London where similar foreign-ownership tax is higher than the 15% additional buyer’s stamp duty payable here.

It is still too early to expect a full residential market recovery as our economic fundamentals are still consolidating due to the varied performances among the electronics and precision engineering, manufacturing, construction and service sectors. The GDP growth for 2017 was 2.5%, lower than the 2.9% growth in the previous quarter. The current unemployment rate is also inching upwards among the mid-career professionals. On the global stage, uncertainties and downside risks remain as Europe wrestles with political reforms and navigates through the Brexit process, and the protectionist trade policies the trump administration intends to implement.

Despite the challenging sentiments, the luxury landed residential market has time and again shown its resilience. In the past two decades, a pick-up in the sales activity of the GCB market during a downturn had seemingly acted as a stimulus to boost the sale of new homes. This happened in 1999 during the Asian Financial Crisis, in 2004-6 as the economy was recovering from the recession and again in 2009-10, amidst the subprime mortgage-led Global Financial Crisis. The return of confidence of astute GCB investors had underpinned the recovery of the luxury market.

Fast forward to the first half of 2017, the recent GCB deals were largely premised on sellers lowering their price expectations to more realistic levels. As well, the return of volume could point to a return of confidence. Already, the estimated new home sales volume in the first half of 2017 is around 6,000 units, which looks set to outperform 2016’s sales volume of 7,972 new homes. As volume returns, it will help to stabilise prices. The trough is certainly near, and home prices could reach the point of inflection soon.

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