Buying a GCB might be a smart move for the rich. But there are other ways to spend money
Transacted prices for land in GCB areas average around S$2,000 psf. This means that buying a detached house in a GCB region will cost you over S$30,000,000. Renovation or redevelopment costs and transaction fees can add up to several million dollars.
Analysts predict that after a relatively calm 2023, the number transactions for detached homes within GCB Areas will pick up in 2020. Analysts predict prices will be stable, but with room to increase, possibly later in the calendar year.
Long-term, GCB Areas enjoy strong support for house prices.
In GCB Areas, the supply of detached homes is limited
Singapore is home to around 2,700 homes of this type, and it’s unlikely that the number will increase.
The stock of luxury condos in the districts 9, 10, and 11 will increase as developers build on land acquired through collective sales or state land tenders. The new development on the site of a previous building often has more homes after successful collective sales.
The demand for GCBs comes from a diverse pool of wealth
Congratulations to the estate of late Agnes Tan for donating the proceeds raised from the sale three freehold houses in Chancery Hill Road and Dyson Road. They fetched a total of S$61 million.
The most expensive homes on the private housing market in Singapore are those located in Good Class Bungalows (GCB) areas.
The GCB Areas is a leafy residential enclave where new detached houses have a minimum plot size of 15,070 square foot (sq. ft).
The Urban Redevelopment Authority (URA) has designated 39 GCB Areas. These include Caldecott Hill Estates, Dalvey Estates, Leedon Parks, Nassim Roads and Swiss Club Roads.
Nassim Road may be the most prestigious address. Cuscaden Peak Investments has sold three Nassim Road bungalows at S$4,500 each per square foot on the land or S$206.7 Million.
If valuations of tech companies are not as inflated, then it is possible that tech titans will be less likely to buy high-end houses. The drop in tech titan demand can be compensated for by the growing demand of other business moguls.
GCB Area Homes are seen as hard assets with good value. People who make fortunes through risky and cyclical businesses can use some of the money they have earned to buy a GCB Area property.
Singapore’s growing wealth hub status could expand the GCB buyers pool
Singapore citizens are generally the only ones who can buy landed houses in GCB Areas. Both foreigners and Permanent Residents (PRs), are welcome to purchase condo units.
Singapore has a successful track record in wooing the family offices. The Global Investor Programme allows a principal of a family offices with net investable asset of S$200 million or more to become a PR.
As more ultra-wealthy people become citizens, the number who are interested in buying bungalows within GCB Areas increases.
Singapore’s safe haven premium may rise
Singapore could see a rise in the premium paid for assets due to its status as a haven of calm and order in an otherwise chaotic world. Ultra-wealthy individuals may decide to invest a larger portion of their capital in hard assets, such as homes in GCB Areas.
Singapore will be more appealing to ultra-wealthy clients if they are more likely to set up base in the city.
In comparison, a detached house in a GCB Area costing S$50million is less that 10% of the net wealth of an individual with a networth of more than S$500million.
A GCB Area property costing S$30million is affordable and three times more than the salary of a corporate boss who earns S$10million annually.
Values of land are likely to continue rising
Singapore is a land-scarce country, and homes in GCB Areas are likely to continue commanding a higher price. This is because these areas offer a break from the densely populated city. URA imposes strict planning restrictions for homes in GCB Areas, to maintain their exclusivity and low rise character.
GCB Area owners may benefit from increased land value if some GCB Areas become zoned for a more intensive land use in order to meet future needs.
Invest your money in a productive way
Although the pool of potential buyers for houses located in GCB Areas are more limited than those of luxury apartments, it could grow due to Singapore’s increasing status as a hub of wealth management.
Buying a GCB Area house seems like a safe bet for a wealthy citizen. Even so, GCB Area homeowners should be aware that future taxes may increase.
In Budget 2024, could GCB Area property owners face higher or additional tax rates as taxes progress?
A homeowner in the GCB Area who owns a home with an Annual Value of S$240,000 will pay S$56.780 property tax by 2024. The AV is the estimated gross rental income of the building if it was rented, excluding furniture and furnishings.
A detached home located in a GCB Area is a perfect place to relax, create memories, be a status symbol and host business and friends.
It is true that the ultra-rich are free to spend money how they please. Purchase luxury abodes or yachts, expensive cars, rare wine, precious jewelry, and art.
Nevertheless some of that money spent on buying and sprucing up a GCB Area Home could be better used in the community to support the local economy.
Those who are ultra-rich can, for instance, fund new businesses, help entrepreneurs, save failing businesses, or support efforts to combat climate changes. Such investments could help spur innovation and create new jobs.
The money can also be used for sports, the arts, and to meet the needs of groups that are vulnerable. Singapore’s cohesion social will be benefited by the ultra-rich actively helping the community.
Super rich people here certainly support certain pockets of economy through sound investments, such as a GCB Area residence. They could be encouraged to spend more money to support local businesses, the arts, and sports.