Sales of Singapore’s good class bungalow market is down in 2023
Where will the bungalow market be headed?
The outlook of the bungalow market for 2024 remains somewhat cloudy. We have noticed that due to the increased Additional Buyer’s stamp duty (in December 202021 and April 2023) most of the GCB purchasers in 2022-2023 were Singaporeans or newly naturalised Singapore citizens buying their own property. The majority of the buyers were businessmen and professionals in their 30s or 40s.
The current uncertainty, the impact of the Israel-Hamas war and the Ukraine conflict will determine how many new multimillionaires support this segment.
Secondly, high-end property owners will pay higher taxes. The property tax rate for owner-occupied properties has been increased from 4-23% in 2023 and 4-32% in 2024.
The rates for rented properties have gone up from 11 to 27 percent in 2023, to 12 to 36 percent in 2024.
Some owners may decide to sell their bungalows due to the higher tax burden. On the other hand, a potential buyer whose intention was to buy a GCB for high rental income could decide that this is no longer appealing.
We can expect a slower pace of sales in the first half (2024) with some price moderation.
We know that there are buyers waiting in the wings for sellers to reduce prices. This would increase the sales momentum, which in turn would stabilize prices.
In 2023, sales of Good Class Bungalow Areas will fall to an all-time low. However, buyers will wait for sellers to reduce the price.
2023 was the year that saw the lowest sales volume.
Singapore’s residential property market suffered several setbacks in 2023. These included global geopolitical and macroeconomic conditions, as well as cooling measures on the local front, including a high-profile bust of money laundering. Only 1,268 residential landed units were sold in the year, down from 1,681 units in 2022.
Despite lower sales, land prices on a square-foot basis (psf), have continued to increase. In the past year, detached prices increased 8.4 percent to S$1,699/psf. Semi-detached values grew 12.4% to S$1,678/psf. Terrace prices increased 9.4 percent to S$1,888/psf.
GCB transactions slowing as prices surge
In the landed housing market, detached houses are located in Good Class Bungalows (GCB). The GCBs consist of detached houses on large land plots that are subject to strict planning restrictions in order to preserve the exclusivity of their low-rise nature. URA has designated 39 GCB Areas. Examples include Nassim Road Whitehouse Park, and Chatsworth Park. These GCB Areas have around 2,700 detached housing units and are expected to remain that way in the future.
The 18 GCB sales in 2023 were the lowest volume of sales in a single year since 1996, the first time the URA released statistics.
The luxury market was affected by an eroding mood, which resulted from the uncertainty in the global economy, rising interest rate, property cooling measures implemented in April, as well as anti-money-laundering raids carried out in August.
The buyers also held off because they believed that the asking prices were excessive. They would not pay a premium for a property unless it met their requirements in terms of site attributes, house design, finishes and rarity.
From 2020 to the year 2023, GCBs average prices rose by 30% from S$1,477 to S$1,924/sqft.
Rents and Crazy Rich Deals
The media reported four major GCBs at Nassim Road in 2023, but these deals were not included among the 18 GCBs listed in the caveats database last year. These deals did not receive any caveats.
Cuscaden Peak Investments has sold a three-GCB portfolio to members of the Fangiono clan behind Singapore palm oil producer First Resources. The total price was S$206.7m (S$4,500 psf). Before that, a Fangiono member had purchased a GCB a few blocks away for S$88.7 million (3.917 psf). If these deals were included, the average price per square foot (psf), would have been even higher.
In recent years, the GCB rental market has seen an interesting evolution in terms of rents. Some bungalows leased for more than S$100,000. According to reports, some tenants paid up to three years in advance. The statistics showed that three bungalows in 2021, 2022 and 2023 were leased for above S$100,000.
The party ended in August 2023 after the high-profile money laundering bust. Several of the “wealthy tenant” were either arrested by police or fled the country.
Several bungalows became vacant as a result and are now being rented. Due to the stigma surrounding former tenants, it is taking longer for owners to find new tenants even when they are charging more realistic rents. Asking rents for GCBs have fallen by 30% or more in the fourth quarter 2023.
Many Singaporeans are said to aspire to own their own landed property because they believe that it will bring them prestige, status and long-term planning.
Singapore is a land-scarce country, and this rare combination of large homes on large lots of land adds value to the housing. Singapore’s landed property ownership is only 5 percent, while the other 17 percent live in apartments and condominiums. The remaining 78 percent live in public housing.
Urban Redevelopment Authority data from the past five (2019-2023) years showed that 1300 to 1800 landed homes were traded every year.
But 2021 was different – the sales volume was 3,080 units. The Covid-19 Pandemic made people realise that they need more living space for larger households who work and learn from home.
