The housing market has faced a lot of doom and gloom in recent years. Luxury properties, such as Good Class Bungalows, have borne much of the brunt. On top of it, Singaporeans have increasingly begun to ponder what these big investments are worthwhile, given the state of the market. But does the recent uptick mean they’ll trend again?
Limited GCB supply fueling interest in Crazy Rich Singaporeans
GCBs saw a 47 per cent rise in transaction volumes in the second half of last year, with some analysts speculating an upward trajectory of another 20 per cent this year.
It is important to note that only Singaporean citizens are allowed to own GCBs (barring Sentosa Cove); like moths drawn to a flame, rich Singaporeans flock to such prestigious homes.
GCBs must also have a minimum land plot size of 1,400 square metres. They must not be higher than two storeys, and can only consume 35 per cent of the land to maintain a sufficient amount of greenery in between.
Such ownership and planning constraints result in limited supply. Only 39 residential areas have GCBs, with fewer than 2,8000 units present. Demand for GCBs is thus likely to remain strong, given the few opportunities to own such properties.
GCBs are a safe-haven investment during economic uncertainty
GCBs, like shophouses, are among the Singapore property types perceived as valuable assets in times of economic uncertainty. Ongoing political situations like Brexit and the Sino-US trade war fuel anxiety in investors and are projected to have long term effects, which could partially explain the rising interest in GCBs this year.
One such investment was made by Tony Tung, chairman of oil trader Winson Group. He recently acquired a bungalow near the Botanic Gardens for S$105.3 million, a record-high deal for a GCB. Another mega-deal made this year was by a Tsai family member in Singapore, who bought a GCB for S$93.9 million. The numbers seem defiant of the gloom-and-doom forecasts that followed cooling measures in preceding years.
This is despite the rising home loan rates
Rising interest rates are a short-term effect compared to the long-term benefits of owning a GCB. The US normalising interest rates will indeed raise Singapore’s long depressed home loan rates, which were kept under two per cent for almost a decade (even now, rates under two per cent are possible).
However, rising rates are not a sufficient deterrent to this buyer demographic. Even those who are looking at strict numbers, capital appreciation arising from the scarcity value of GCBs is likely to outpace any interest.
Unlike some investors in, say, mass market condos, this particular demographic remains unfazed by the thought of rising rates.
Future of GCB segment remains positive
All in all, GCBs remain a resilient asset class through market cycles.
In that same line, a new GCB development near Botanic Gardens will soon be launched with an asking price of $3,500 per square foot, exceeding the previous record of $2,700 per square foot set last year. This could set the start of an ongoing trend for landed properties, which have been long due for a revival of interest from the local market.
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