City&Country: Offshore-- Good class bungalow prices hitting peak

Transaction volume may have thinned in 3Q2010, but in the rarefied space of good class bungalows (GCBs) in the prime districts of Singapore, prices have continued to soar. However, there has been some resistance building up, says Steven Ming, executive director of investment sales and Prestige Homes at Savills Singapore.

With most GCBs generally priced from S$20 million today, “this will typically draw the
HNWIs [high net worth individuals] with at least S$30 million to S$40 million to buy them,” says Ming. Understandably, there aren’t too many such individuals in that category, even though Singapore is said to have the world’s highest number of millionaire households. Therefore, the pool of buyers is limited.

However, buyers are still prepared to pay a premium to secure their ideal home when the opportunity comes along. For instance, a GCB at Belmont Road on a 29,310 sq ft freehold site changed hands for S$35.76 million, or S$1,220 psf, in early October, according to a recent caveat. K H Tan, managing director of Newsman Realty and a specialist in the GCB market, is said to have brokered the sale. Interestingly, the previous owner of the house had purchased the site just 12 months earlier for S$27.35 million (S$933 psf), hence reaping a 31% capital gain in 12 months. The property at Belmont Road had changed hands twice — within months of each other in the previous peak of 2007 — the first time in June of that year, for S$21.4 million (S$734 psf), and then just two months later, for S$23.3 million (S$795 psf).

The month of October also saw the sale of a GCB at Swettenham Close for S$20 million, or S$1,200 psf. Built five years ago, the house, which sits on a 16,000 sq ft freehold site, is still relatively new.

In a year of eye-popping transaction prices in the luxury-bungalow segment, the price index for bungalows (or detached homes) shot up 26.8% in the first nine months of 2010, compared with the general landed homes price index, which rose 24% from end-2009 levels. Meanwhile, the non-landed homes index rose only 12.0%. The limited supply of landed homes could be the key reason for the sharp increase in prices, says CB Richard Ellis (CBRE).

For the whole of last year, 92 GCBs were sold for a total of S$1.68 billion, according to Jones Lang LaSalle. So far this year, a total of 81 GCBs worth S$1.56 billion have changed hands, based on caveats lodged with URA as at Oct 26.

For sure, sentiment dipped in September following the government’s measures at end-August. However, property agents in the GCB market have noted renewed interest in the last two weeks of October, based on the level of enquiries received. There’s also been a notable shift in the make-up of the buyer profile. “Investors, especially those who have been buying GCBs to trade, have been less active in the recent months,” says Newsman’s Tan. “Demand is mainly driven by owner-occupiers, with a lot of new buyers in the market.” While the GCB market is still dominated by Singaporean buyers, he notes that there has also been a noticeable increase in the number of Hong Kong and mainland Chinese HNW buyers who are Permanent Residents (PRs) in Singapore.

The proposed amendments to the Residential Property Act on Oct 18 with regard to the ownership of restricted property, particularly landed property, by foreigners who are PRs is likely to have limited impact on demand, notes Savills’ Ming. “The main and probably most significant difference is that the penalties have increased,” he adds. “However, wealthy PRs continue to search for landed properties for their residences.”

At Sentosa Cove, a new record average price has been set with the sale of a waterfront bungalow on a 9,435.72 sq ft, 99-year leasehold site. The property was sold for S$28.2 million, which works out to S$2,989 psf. The house, built by Satinder Garcha’s Elevation Developments, is said to have unobstructed sea views. The buyer is said to be a mainland Chinese and, according to market sources, the sale was brokered by Newsman Realty.

This price beats the previous record set at Sentosa Cove when a bungalow at Paradise Island was sold for S$36 million, or S$2,403 psf, in May this year. With this transaction, property agents expect to see another round of upward adjustments to the already lofty asking prices by owners of bungalows at Sentosa Cove.

What’s on the market?
There is a newly completed GCB at Gallop Road by Elevation Developments. The house on a freehold, elevated site of 14,940 sq ft comes with a covered car park, entertainment area, home theatre and six  bedrooms. The asking price is S$32 million, or S$2,142 psf. The main attraction of the GCB is its quiet location, as it is near a cul-de-sac and a short distance from the Botanic Gardens. Newsman Realty’s Tan is the marketing agent for the property.

Meanwhile, in Bukit Sedap, off Holland Road, there is a GCB on a 999-year leasehold, 15,556 sq ft site for sale. The bungalow is on a GCB estate developed by Far East Organization 15 years ago. Its asking price is around S$1,400 psf, which works out to S$21.8 million. Savills Singapore’s Prestige Homes is said to be marketing the property.

Coming up at Colliers International’s auction on Nov 18 is a GCB located on Coronation Road West, off Bukit Timah Road. It is a classic mid-century bungalow with a large yard that contains an outhouse, a lawn, swimming pool and pergola. The single-storey house has four bedrooms, high ceilings and original timber floorboards. It sits on a freehold site of 25,336 sq ft. According to sources, the indicative price is around S$28 million, or S$1,100 psf, based on current market prices.

The most recent transaction at Coro­nation Road West was for a smaller bungalow of 9,160 sq ft, which was sold for S$11.12 million, or S$1,214 psf, in September, according to a caveat lodged with URA. However, that particular bungalow is not considered within the GCB area, says a property agent.

Most of the interest has been from owner-occupiers, observes Grace Ng, deputy managing director and auctioneer at Colliers International. “In the bungalow market, owners’ price expectations are very high,” she says.

Some investors who were actively buying in the past 1½ years have turned sellers today, as prices continue to spike due to strong demand and limited supply. “However, one has to bear in mind that these owners have strong holding power and will not be prepared to let go of the property unless they can get their asking prices,” notes Tan.

For instance, the owner of a large GCB at Leedon Park that sits on a 41,850 sq ft plot of land had an offer of S$60 million last month from a potential buyer. However, he turned it down as he is holding out for the S$69 million asking price, say sources.

A GCB at Victoria Park, off Farrer Road on a freehold site of 32,077 sq ft that was purchased for S$38.667 million (S$1,205 psf) in October last year is now on the market, with an indicative price tag of S$55 million (S$1,715 psf). The premium price is because the site is large enough to be sub-divided for building two smaller GCBs. The marketing agent for the property is Savills Singapore’s Prestige Homes.

Meanwhile, a GCB at Third Avenue — bought in May this year for S$19.88 million (S$1,126 psf) — is on the market for S$26 million, or S$1,472 psf, based on a land area of 17,659 sq ft. The six-bedroom bungalow is designed with an H-shaped configuration. The master bedroom suite, which comes with a spacious study, is housed in one wing, while the other wing contains the family room and entertainment area. The house has a total built-up area of about 10,000 sq ft and comes with water features, a swimming pool, driveway in front and car porch in the rear. As the property was built 15 years ago, it is expected that the new owner would tear down the structure to build their dream home. Based on a built-up area of 10,000 sq ft and construction cost of around S$500 psf, the cost of a new home would be at least S$5 million, depending on the materials used.

In the Belmont Road neighbourhood, off Leedon Road, a GCB is available for S$28 million, according to marketing agent Savills. The bungalow, built in 2003, sits on a 21,937 sq ft plot. Hence, the asking price works out to S$1,276 psf. The owner, an investor, had purchased the property in 2000 for a mere S$10.2 million (S$465 psf).

“It’s a numbers game,” says a property agent specialising in luxury homes who declined to be named. “As the sellers have the ability to hold, they will sit on their property and won’t budge until they get the right price.”

While interest from Singaporean investors and niche developers is still strong, at least one of them is lamenting the asking prices today. Niche developer in the GCB market, Singaporean George Lim, says he’s going to sit out the market until “sellers are more realistic in their pricing”. His most recent purchase was four months ago, when he bought a GCB with a land area of around 19,000 sq ft for S$20 million. Lim has developed and sold seven GCBs worth a total of S$145 million since 2006. The most recent sale was that of the brand-new GCB sitting on a 25,231 sq ft site at Leedon Park. It went for S$35.5 million (S$1,407 psf) in  October last year.

Following the sale of the Leedon Park GCB, Lim had purchased a 15,635 sq ft development site at Leedon Park for S$15 million and a 20,000 sq ft site at Binjai Park for S$15.85 million (S$792 psf) last year. He’s in the midst of developing the GCB at Binjai Park, which is targeted for completion in 2Q2011. “I’m not buying now because everyone is demanding sky-high prices,” he says. “GCB demand will cool down in a few months and I expect it to pick up in 1Q next year.”

Cecilia Chow is City and Country editor at The Edge Singapore

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 831, Nov 8-14, 2010