In 2023, Sales of Singapore’s good class bungalow market falls to historic low
GCB deal slowdown as price increases
Good Class Bungalows are the apex in the landed property market. GCBs have large plots with detached houses. They are protected by planning restrictions that preserve their exclusivity. URA gazetted 39 GCB Areas. Some examples include Nassim Road Whitehouse Park and Chatsworth Park. The GCB Areas are home to around 2,700 detached properties and this number is expected not to change in the long run.
In 2023, 18 GCBs were sold. This was the lowest amount of sales since 1996.
The luxury market suffered from a deterioration in sentiment due to the ongoing uncertainty of global economies, higher interest rates and property cooling measures taken in April.
Some buyers held back on purchasing because the asking price seemed too high. Buyers would only pay for properties that met certain criteria such as site attributes, interior design and finishes, and rarity.
In the four years between 2020 and 2023 the average price for GCBs rose 30 per cent, from S$1,477/sqft to S$1,924/sqft.
Buyers are waiting for sellers’ price reductions to bring sales down to historic lows in 2023.
Singaporeans often aspire for a landed house because of its prestige, status, and legacy planning.
Singapore’s land shortage makes this housing type very valuable. Singapore is a land-scarce country. Only 5 percent of residents own landed properties.
Urban Redevelopment Authority (URA), based on data collected over the last five-year period (2019-2023), reported that 1,300-1,800 landed houses were purchased every year.
2021 however was a special case – with a sales volume of 3,080 outstanding units. The Covid-19 epidemic made people realize the need for more living space. They needed to accommodate bigger families that worked and learned from home.
Crazy deals and rentals
The 18 GCBs reported in data on caveats for last year do not include the four GCBs completed at Nassim Road as reported in media in March and April 2023. The deals in question were not subject to any caveats.
Cuscaden Peak Investments, the Singapore-listed palm oil company First Resources’ parent company, sold a portfolio consisting of three GCBs for a total amount of S$206.7million (S$4,500 per sq. ft.). Before this, a Fangiono relative had bought a GCB a bit further along the road for S$88.7m (S$3,917 psf). If these deals had also been included, it would have increased the average (psf).
The escalating rents on the GCB market have been a notable development in recent times. Some bungalows have been rented for above S$100,000. The tenants of these bungalows paid their rent in advance, sometimes three years. Statistics show that in 2021-2022, there were three bungalows which were leased above S$100,000. However, by 2023, this number increased to four.
The party has essentially ended since the August 2023 money-laundering scandal, when several of the “wealthy renters” were arrested or forced to leave the country.
As a consequence, many bungalows have fallen vacant and are available to rent. Even with more realistic rental rates, the owners of such properties take longer to find tenants because of the stigma associated to former occupiers. By the fourth-quarter of 2023, rents on GCBs would have dropped by 30 percent or more.
2023 is the year of the lowest sales volume.
Singapore’s housing market experienced several headwinds in 2023. This included macroeconomic and political conditions worldwide, property cooling measures and a highprofile money laundering case on home soil. Only 1,268 homes were bought and sold, compared to 1,681 in 2020.
The landed house prices per square foot (psf), despite the lower sales figures, continued to increase. Detached house prices increased by 8.4% in the last year to S$1,699/psf. Semi detached prices grew by 12.4%, to S$1,678/psf. And terrace house prices jumped 9.4%, to S$1,888/psf.
Where is the bungalow industry headed?
In 2024, the outlook for bungalows is still a bit cloudy. In 2022 and 2023, most of the GCB Buyers were Singapore Citizens and newly Naturalised Citizens who bought their first property to be occupied by them. This was due to an increase in the Additional Buyers Stamp Duty. Most were professionals or businessmen in late 30s and early 40s.
With the current uncertainty of the Ukraine war and Israel-Hamas conflict and its repercussions, it is yet to be seen how much more money will come into this sector.
Second, the owners of expensive properties will have to pay higher property taxes. Owner-occupied property taxes have been raised by 4 to 23 percent in 2023. They will be increased to 4 or 32 percent in 2024.
Renting out properties will see rates increase from 11-27 per cent to 12-36 per cent by 2024.
One hand, the increased tax burden may lead to some owners selling their bungalow. On the one hand, a buyer who initially intended to buy a GCB with the intention of generating high rental revenue may find that it no longer makes sense to do so.
Prices will moderate in the first six months of 2024 due to all these factors.
We do know, however, that there are many buyers ready to buy at a lower price. If that happened, the momentum of sales would improve, stabilizing prices.
