Buying a GCB is a good investment for the wealthy, but money can be used in many other ways
In Singapore’s expensive private housing market are detached homes in Good Class Bungalow Areas (GCB).
The ultra-rich should be able to spend their money however they choose. You can buy expensive abodes, yachts or cars, fine wines, art, jewellery and precious stones.
Nevertheless, it is argued that some of the money used to purchase and spruce-up a GCB Area house should be allocated to better support both the community and the economy.
The ultra-wealthy, for example, can finance new businesses, support entrepreneurs or turn around failing companies. These investments can help to create jobs and stimulate innovation.
A detached home in a GCB requires a budget exceeding S$30,000,000. Transacted prices are around S$2,000 per square foot. The cost of redevelopment or refurbishment works, as well as transaction costs, can be several million dollars.
Analysts expect a pickup in the number of detached home sales in GCB Areas in 2024 after a relatively quiet year in 2023. Analysts expect prices to remain firm with some room for growth, likely later in the year.
Money can be used for social causes, sports and arts, as well as the needs of vulnerable people. The ultra-wealthy will help to strengthen Singapore’s social cohesion by actively giving back to the community.
The estate of the late Agnes Tan deserves praise for donating to charity the proceeds from the sale of three freehold homes at Chancery Hill Road, Dyson Road and Dyson Road. These houses sold for a total S$61,000,000
Over the long-term, GCB Areas are supported by strong drivers that support house prices.
There is a shortage of detached houses for sale in GCB Areas
Singapore has around 2,700 of these homes and the number is unlikely to grow.
Developers will build luxury apartments on sites purchased through state land auctions or collective sales. When collective sales are successful, the new building that is built on the former site often contains many more homes.
Demand for GCB comes from a variety of sources
With Singapore’s status as a wealth hub, the GCB pool of buyers could increase
The pool of buyers of houses in GCB Areas may be smaller than that of luxury apartments. However, this pool is likely to expand as Singapore becomes a more important wealth management hub.
In general, the purchase of landed properties in GCB Areas are restricted to Singaporeans. Foreigners and permanent residents (PRs), as well as foreigners, are allowed to purchase condominium units.
Singapore has been successful in attracting family offices. A family office principal who has net investable assets worth at least S$200,000,000 can be a PR under the Global Investor Program, provided they meet other criteria.
The number of buyers of GCB Areas is likely to increase as more ultra-wealthy former PRs become new citizens.
Singapore’s premium for safe haven could increase
Singapore’s reputation as a safe haven could increase the value of its assets. The ultra-wealthy may invest a greater share of their assets in Singapore, including homes located in GCB Areas.
Singapore will become more attractive to ultra-wealthy individuals if more of them set up their base here.
A detached home with all bells and whistles in a GCB Area that costs S$50m is less than 10% of a net worth exceeding S$500m.
A GCB Area house costing S$30m is three times as affordable as a corporate executive earning S$10m per year.
The value of land may continue to increase
Homes in GCB Areas in Singapore will continue to command a premium price because they provide a respite in a densely populated urban environment. To preserve the exclusivity of GCB Areas and their low-rise nature, the URA has set strict planning requirements for these homes.
GCB Area homeowners may also benefit from increased land values if certain GCB Areas are zoned to be used more intensively in the future.
Spend your money wisely
Buying a GCB Area property seems like a good investment for ultra-wealthy citizens. Owners of GCB Area properties should still be aware that they may have to pay higher taxes in the future.
Tech titans are likely to be less interested in buying high-end properties when valuations for technology companies are lower. Any drop in demand by tech titans will be offset by a rise in demand from other business moguls.
GCB Area houses are considered to be good hard assets and are a great store of value. People who have made fortunes in risky or cyclical business may wisely channel some of those gains towards buying a GCB Area house.
Could GCB Area residents be subjected to higher taxes or additional taxes under Budget 2024 as taxes become more progressive?
According to current rates, a homeowner of a GCB Area house with an Annual Value (AV), of S$240,000, will pay property tax in the amount of S$56.780 by 2024. The estimated annual gross rent for a property is calculated by calculating the AV, excluding furnishings, maintenance and furniture.
A detached house in a GCB Area can be a place of comfort to unwind and build memories. It is also a way to show off your status and a good venue for hosting friends and business partners.
The GCB Areas consist of leafy housing enclaves where detached new homes are built on minimum plot sizes around 15,070 sq ft (sq ft).
The Urban Redevelopment Authority has designated 39 GCB Areas, such as Caldecott Hill Estate and Dalvey Estate. Other areas include Leedon Park, Nassim Road, Swiss Club Road, Nassim Road, and Leedon Park.
Nassim Road is arguably the best address. Cuscaden Peak Investments, a Singapore-based real estate company, sold three Nassim Road freehold bungalows last year for S$4,500 psf on the land area. This equated to S$206.7m
The super-rich here are certainly supporting pockets of the local economy by splurging for sound investments like a GCB Area house. Maybe they could be convinced to spend more on building businesses, supporting the community and nurturing the arts and sport scenes.
