Overview

The blistering pace of sales of good class bungalows (GCBs) in 2021 has slowed considerably this year and sales volume looks on track to underperform 2021’s bumper year of transaction. The cool down in sales from last year’s robust performance was unsurprising, as the availability of GCBs for sale has tightened on the back of 2021’s impressive performance. Also, many prospective buyers and GCB owners are taking time to assess the market following the price growth and strong demand last year. In addition, GCBs tend to be tightly-held and owners are usually not in a hurry to sell or divest their property.
Overall Landed Home Prices 
According to the flash estimate released by the Urban Redevelopment Authority (URA), prices of landed homes rose by 2.9% QOQ in Q2 2022, climbing for the fourth consecutive quarter. Overall landed home prices have grown by 14.3% since Q2 2021. As of Q2 2022, the landed price index has hit a new high, with an index reading of 211.3 – the last peak being in 3Q 2013, where the price index posted a reading of 178.9 points. The robust growth in landed home prices is largely led by the price increase in the high-end landed market, namely GCB sales which achieved record-breaking prices over the last few months.

Based on caveats lodged, the top GCB deal in January to June this year was the sale of
42 Chancery Lane for about $66.1 million (see Table 1) – translating to $1,931 psf on land area. The property which sits on a 34,216 sq ft of freehold land was reportedly sold to Kelsey Cheng Tan, wife of Kester Tan who is the son of a Filipino tycoon.
The next priciest GCB transacted this year was 14 Olive Road – in the Caldecott GCB Area – which changed hands for $50.2 million in April. The price works out to $1,800 psf on land area of 27,909 sq ft. Media reports indicated that the buyer is the grandson of the late property magnate and hotelier Wee Thiam Siew.

Prices of GCBs have been on an upward trend since the end of 2020, with average unit prices on land areas for GCB transactions hitting $2,000 psf on land area in 1Q 2022 – a considerable leap from last year where the average price of GCBs has been ranging between $1,600 to $1,700 psf. 
The rise in prices can be attributed to the tight supply of GCBs up for sale and owners raising their asking prices, after the strong showing in 2021.
Prices of GCBs are expected to remain elevated in the near-term with sellers remaining firm on their higher asking prices for these exclusive homes. However, the interest rate hikes and a potential global economic slowdown may tame GCB demand and could in turn weigh on prices in the medium term.

With sales activity in the GCB market being relatively muted, sales momentum in the prestige landed homes sector has also quietened down considerably from last year’s high. In the first half of 2022, transactions for prestige or high-end landed homes – defined by PropNex as landed homes valued above $10 million – recorded 60 deals, amounting to about $1.16 billion.
The $1.16 billion worth of sales for the first half of 2022 pales in comparison to the first and second half of 2021, where an impressive $2.68 billion and $3 billion of sales were recorded respectively. That said, the sales performance of the prestige landed segment in 1H 2022 was still commendable, trending above pre-pandemic levels in 2019. In addition, the government also rolled out new property cooling measures in December 2021 and announced impending property tax hikes that will have a bigger impact on pricier, high-end residential properties.

Buoyant Leasing Demand For High-End Landed Homes

While sales momentum has cooled in 1H 2022, rental and occupier demand for high-end landed homes has not shown any signs of slowing. Recent news reports of overseas high net-worth individuals renting sprawling bungalows for several hundred thousand dollars per month is not surprising, especially since many of these ultra-wealthy foreigners are unable to buy a GCB under local restrictions. Of note, the top leasing transaction signed in the first five months of 2022 was done in April 2022, where a GCB in Dalvey Estate was rented out for a monthly rental of $150,000 – which is equivalent to an annual rental of $1.8 million.
Rental demand and interest from high net-worth foreigners for luxury landed homes will likely continue to be elevated in the near-term. In the light of geopolitical instabilities in several regions of the world, Singapore’s status as a safe haven has possibly prompted some foreign high net-worth individuals and their families to seek residences in the city state.
According to the latest Henley Global Citizens Report, released on June 13, Singapore is
expected to see a net inflow of 2,800 high net-worth individuals in 2022. The report was
published by international residence and citizenship investment advisory firm Henley &
Partners, which tracks private wealth and investment migration trends worldwide.
Singapore ranks third place behind the United Arab Emirates (UAE) and Australia in
terms of net inflow.
As per the report, countries with the highest projected outflow of high net-worth
individuals in 2022 are Russia, China, India and Hong Kong – as a result of geopolitical
turmoil and uncertainties in these cities. With more high net-worth individuals expected
to migrate and perhaps settle down in Singapore, the high-end landed market is
expected to be the largest beneficiary from this inflow.

Impact of hikes in ABSD and Property tax likely muted

In December 2021, the government announced a slew of measures targeting the residential property market, one of which was the revision in additional buyer’s stamp duty (ABSD) rates. The revision saw ABSD rates increasing the most for foreigners and investors who owned multiple properties. While the ABSD can be a hefty sum – up to 25% for Singaporean investors and 30% for foreigners – the GCB market is not likely to be significantly impacted by the latest hikes. Firstly, only Singaporeans are allowed to purchase GCBs. Secondly, for many GCB buyers, they are mostly new citizens – and the GCB property is usually their first home purchase and hence they will not be hit by the ABSD. Some ultra-wealthy buyers may choose to buy the property under a living trust; a trustee may apply to the Inland Revenue Authority of Singapore (IRAS) for a refund of
the ABSD (Trust), subject to fulfilling various conditions. Even if the GCB purchase was not their first property, most buyers are ultra-high net worth individuals and
business magnates, who should be in the position to afford the large ABSD sums.
Besides the cooling measures, in February 2022, as part of the Budget 2022 package announcement, the government stated that it will increase the progressivity of property tax rate for both owner-occupied and non-owner occupier residential properties in two steps, in January 2023 and January 2024. The change will see higher end properties
facing a steeper increase in tax rates. This would mean the property tax payable for investment properties, luxury apartments in the city, landed homes
and GCBs, will increase starting from 2023 onwards. Despite this, sales and prices of high-end landed homes are not expected to be significantly impacted as buyers
of such homes tend to be wealthy and would likely be able to absorb the higher tax. Moreover, most of these owners are expecting capital values to rise in the future,
thereby mitigating the property tax hike.

Market Outlook

Singapore – which is projecting a 3% to 5% GDP growth in 2022 – continues to be a highly attractive investment destination, with its stable political environment and currency, pro-business policies, safety, and well-developed infrastructure. As the Singapore economy reopens with the lifting of most Covid-19 restrictions, more investors are expected to return to the market. Singapore real estate is likely to be a significant beneficiary of the safe-haven capital flows amid the pandemic-lockdowns in China as well as uncertainties around global growth due to the rapid inflation and sharper interest rate hikes in many advanced economies, on the back of the
Ukraine-Russia war.
Demand for landed homes will likely stay elevated as buyers look for more “defensive assets” to park their funds in. Landed homes – particularly GCBs – are in extremely limited supply in land-scarce Singapore, making them a good store of value over time. To this end, freehold GCBs are also seen by owners as a way to preserve and grow wealth as well as legacy planning, by handing down the property to future generations. With inflation climbing higher, residential properties could also be a hedge against inflation risks, as their values tend to appreciate over a period of time.
Despite the heightened uncertainties and economic headwinds, PropNex’s GCB and Prestige 

Landed team noted that the buying interest in GCBs remains keen, likely outstripping the supply of properties listed for sale on the market. Looking ahead, asking prices are also expected to remain firm for the rest of the year amid the steady demand and limited stock.