SG good class bungalows: what lies ahead?

February 22, 2018 / By  

Sales for Good Class Bungalows (GCBs) – the most exclusive form of landed housing in Singapore – reached a five-year high in 2017.

There were 41 GCB transactions with a cumulative worth of SGD 867 million (US$649 million) in 2017, according to caveat records from the Urban Redevelopment Authority’s Real Estate Information System (URA REALIS).

This was up from 37 GCB deals worth SGD 789 million (US$590 million) in 2016. Depending on factors like the location, plot sizes, terrain and the condition of the bungalow, prices ranged from SGD 858 to 2,351 per sq ft (US$642 to 1,759 per sq ft) on land area for the 41 GCBs sold in 2017.

GCB Transactions in 2017
*While by definition GCBs are required to have a minimal plot size of 1,400 sq m or 15,069 sq ft,
those with land plots of below 15,069 sq ft when the 39 GCB Areas
were gazetted in 1980 are still considered GCBs.
 Source: URA REALIS, JLL Research, February 2018

The pick-up in buying activity coincided with an improvement in Singapore’s economic growth and a strengthening private residential housing market in 2017. Demand was also underpinned by the fall in GCB prices which corrected by circa 13 per cent in 2016, from its recent 2014 peak, going by caveat records.

This came amid more realistic price expectations from genuine sellers and is in tandem with the islandwide price movement for detached homes. According to JLL Research, prices of detached houses with minimum land area of 5,000 sq ft in both prime and non-prime districts fell by 18-19 per cent from 2014 to 2016.

With economic prospects looking positive, we expect GCBs to remain sought after in 2018. However, pricing and the available stock for sale will remain key considerations.

For one, the stock of GCBs is limited and few are willing to part with their assets unless at attractive prices or due to other personal reasons.

Meanwhile, the buyer pool remains small as ownership of GCBs is restricted to only Singaporeans. These days, GCB buyers comprise largely Singapore corporates, ultra-high-net-worth Singaporean families and Singaporean entrepreneurs in their 40s, as well as new citizens, with those originally from China particularly prominent.

Many of these well-heeled Singaporeans sought GCBs for its coveted address, prestige, exclusivity, wealth preservation quality and measure of one’s financial success. As supply in the foreseeable future is unlikely to change significantly from some 2,800 plots within the 39 safeguarded GCB Areas currently, this would further enhance the wealth preservation quality of these prized freehold assets.

Notwithstanding the restricted demand pool, prospective sellers are expected to raise or be firmer on their price expectations in 2018. This is in view that genuine buyers are likely to be more willing to commit earlier rather than later, taking into consideration that GCB prices have started to firm, with anecdotal evidence based on caveat records indicating a marginal 0.8 per cent rise in GCB prices in 2017.

However, GCB prices are not expected to run away in 2018 as the Additional Buyers’ Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) requirements will continue to temper prices that buyers are prepared to offer.

In light of the above, we expect overall GCB prices to rise by 5-8 per cent in 2018. Transaction volumes could also surpass 2017’s level moderately.

List of 39 GCB Areas
Source: URA

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