GCB Sales Volume to remain robust in 2022

The Good Class Bungalow (GCB) market saw a strong performance in 2021. However, this year is expected to see a decrease in sales volume.

1. GCB sales volume expected to decrease in 2022 but prices to remain stable

Market watchers predict that the volume of Good Class Bungalows will decrease this year, as more supply has been removed from the market following the strong sales momentum between Q4 2020 & Q3 2021

Despite this, GCB prices will continue to rise, albeit at a slower rate, due to the high demand for these properties. KH Tan, Newsman Realty’s Managing Director, sees GCB price increases of at least 10% over the next twelve months.

“Most sellers are strong holders and don’t want to sell. According to BT, they will only consider selling if they are offered at current prices or higher,” stated Steve Tay (List Sotheby’s International Realty’s Senior Vice-President), as quoted by BT.

2021 saw an increase in the number GCBs sold. This was due to a series of high-profile transactions by tech CEOs and their families. Most GCBs are purchased to live in. Due to the low supply of GCBs and rising prices, buyers who plan to purchase GCBs will likely make a purchase if they find a suitable property. This keeps demand strong.

2. Increasing interest rates will cause auction listings to rise

As the government’s extended credit support measures end and interest rates rise, more properties will be put up for auction.

The auction success rate may decrease from 4.8% in 2021. Properties will take longer to sell.

Knight Frank data revealed that auction listings (including repeat listings, but excluding properties not sold at auction) rose by 35.4% annually to 670 in 2021.

MAS has warned Singaporeans about rising mortgage debt in the face of increasing mortgage rates. This could dampen the interest of potential buyers who want to practice financial prudence.

3. Private home sales that are not landed increase by 57.4% in 2021

Despite the recurring flareups in COVID-19 variants as well as changing restrictions, Singapore saw its transaction volume for private non-landed homes rise 57.4% to 28,795 units by 2021.

Despite the fact that Q4 2021 transaction volume fell 20.1% to 6,375 units, this increase is still significant.

Cushman & Wakefield also revealed that Singapore’s realty market had attracted nearly $26.2 billion in investment sales in 2021. This is 10.4% more than the previous year. Quarterly, investment volume slowed to $7.4 Billion in Q4 2021. 38% of total sales were made by the private residential market.

4. For BTO projects that were launched within the past two years, there is a waiting period of three to five years

The waiting time for Build-to-Order projects (BTO), that have been launched in the last two years will be between three and five years. This is similar to BTO projects that were launched before the pandemic.

It expects that flat buyers will be able to move into their new homes in four to five years from the date they book their flats. After taking into consideration the six- to twelve month delays caused by the pandemic, and excluding any other unforeseen circumstances, this is what the ministry expects.

BTO delays have impacted young couples and their families. Many are now looking to rent or resell HDB properties. We can only hope that the affected people will get their keys sooner than we expect due to the continuing manpower shortage and rising material costs.

River Peaks I &II, the Rochor BTO project launched in Nov 2021. Source: HDB

5. There are no boundaries to new HDB flats in prime locations

This is because HDB and MND must consider many factors such as market values and local attributes “before deciding whether or not to apply the PLH method to a specific site”.

MND explained that current intentions are to “apply the new model to select public housing projects in central areas such as the city center and surrounding areas, including GSW that have very high market prices and would require substantial additional subsidies to make flats affordable”.

It is still a hot topic to discuss the location and timing of a BTO project using the PLH model.

6. New, resale HDB flats remain affordable

(MND) revealed that all new Housing and Development Board flats (HDB) are priced below market.

The ministry replied to Parliament in writing, explaining that HDB determines the market value of new flats by first comparing the prices of similar resale flats near them as well as the individual characteristics of the flats and the prevailing market conditions.

HDB applies a substantial subsidy to the assessed value to ensure affordable first-time homes. Eligible first-time buyers may also be eligible for up to $80,000. To ensure that such flats are affordable to first-time buyers, the government offers up to $160,000 in housing grants. To ensure that resale flats are affordable for families with first incomes, the government provides housing grants of up to $160,000.

Housing affordability is a major concern, especially among SIngaporeans. It is clear that the Singapore government is closely monitoring housing supply and prices as HDB resale values rise for seven consecutive quarters.

7. Construction of Serangoon North and Tavistock stations will begin in Q2 2022

The LTA has awarded two civil contracts totaling $861 million. Hock Lian Seng Infrastructure won the contract to design and construct Serangoon North station, tunnels and station. Sato Kogyo(S) was awarded the contract to design and build Tavistock station, tunnels and station.

CRL is Singapore’s eighth MRT line. Its first phase will be available for passenger service in 2030.

Stage 1 of CRL will see 12 stations constructed, serving over 100,000 households in the Loyang Pasir Ris and Tampine areas.

8. Three foreigners were responsible for a woman being jailed for purchasing properties from her

Two weeks imprisonment was given to a Singaporean woman for buying three detached properties for three foreigners. The intention was to transfer ownership after they obtained Singapore citizenship.

Song Fanrong was sentenced to one year in prison for violating the Residential Property Act. He was accused of purchasing a restricted residential property for a foreigner. Song Fanrong had offered to buy a Belgravia Villas residential unit for Wang Chen, a Chinese national.

The sentencing considered two similar charges against the two properties.

9. Edmund Tie is cautiously optimistic about real estate in 2022

Edmund Tie is cautiously optimistic about the prospects for the residential, investment, industrial and retail real estate markets this year. The office segment will see positive net absorption growth and rental growth.

It also noted that the prospects for industrial sectors remain strong and intact, especially for high-specification logistics. Edmund Tie anticipates that certain sectors, such as precision engineering, logistics, and electronics, will see expansions despite businesses being cautious about their space needs.

Retail sentiment will improve as COVID-19 is accepted in the community. The retail sector is likely to stabilize this year. Edmund Tie predicts that residential price growth will slow following the introduction cooling measures.

10. CBD Grade A office demand rose by more than 8x between 2021 and 2021

CBD Grade A office space has seen a more than eight-fold increase in demand, reaching 0.8 million square feet by 2021.

This rise in demand can be attributed to the shift towards quality office space, driven by technology and financial sectors. These branches accounted to at least 72% in new CBD leases last year according to Cushman & Wakefield data.

“Resurgent office demand, tight supply, and expected tightening vacancy rate are expected to propel CBD grade A office rents up by 4.6% in 2022,” stated Wong Xian Yang (Cushman & Wakefield Research Head for Singapore).

11. Omicron affecting Singapore REITs: Singapore REITs will continue to recover

UOB KayHian believes that Singapore’s REITs will continue to recover despite the Omicron variant’s threat, owing to the city-state‚Äôs high vaccination rates, and opening of borders.

Singapore has agreements with 24 countries on vaccination travel lanes (VTL). The border between Singapore, Malaysia and Singapore remains open.

The Good Class Bungalow (GCB) market saw a strong performance in 2021. However, this year is expected to see a decrease in sales volume.

Jonathan Koh, UOB KayHian’s CFA, expects that the reopening and expansion of VTLs will occur in 2H 2022. He also anticipates new agreements being introduced. This will increase the recovery of the hospitality industry to 2H 2022.

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