SINGAPORE: The rental market for luxury properties, particularly Good Class Bungalows (GCBs), slashes monthly rentals in response to a muted premium housing market.
EdgeProp Singapore reports that according to Ms Jacqueline Wong, executive director of Hardington Private, a niche consultancy for ultra-high-net-worth individuals and family offices: “Some GCBs listed at monthly rents of S$100,000 before have now been marked down to about S$65,000 a month.”
This reflects a larger pattern within the premium housing sector, wherein property owners adjust their rental valuations to adapt to changing market conditions.
One example is the Nassim Road GCB, formerly leased to Su Baolin, a key figure embroiled in Singapore’s largest money laundering case. Once commanding a staggering S$120,000 monthly, the property’s rent has plummeted to S$60,000.
Similarly, the Bishopsgate GCB, previously leased at a record-breaking S$150,000 per month, remains vacant following the legal issues of its tenant, Vang Shuiming.
Despite the unchanged asking price, there is a notable lack of demand, highlighting the challenges owners face in the current market environment.
Amidst these developments, PropNex associate group director, Mr Shawn Wong, an exclusive marketing agent for a GCB at 4 Cable Road, notes that “owners are more realistic about asking rents today.”
The Cable Road GCB, owned by an anonymous shipping magnate, was purchased in 2006 for S$10.2 million and subsequently enhanced with a new wing and swimming pool in 2007.
It was last rented for S$57,000 per month by a Chinese technopreneur in November 2021.
The property spans 17,329 square feet with an 11,000-square-foot bungalow featuring seven bedrooms, six of which are en suite.
After substantial renovations costing S$1.2 million, including upgrades to the home automation system, kitchens, and an addition of a wine storage room, the GCB was listed at S$60,000 per month in late 2021.
Despite its high-end amenities, including a professional kitchen and extensive home automation, the previous tenant, a Chinese technopreneur, vacated in August last year without renewing the lease after he agreed to the S$80,000 per month rate.
Since his departure, the property has been refurbished and is back on the market at the same rate, at S$60,000. According to PropNex’s Mr Wong, “Interest has been strong as the asking rent is in line with the market today.”
The potential tenants are mainly expatriate senior management from multinational companies, private equity executives, and tech entrepreneurs. Offers currently range between S$52,000 and S$55,000 per month.
In addition to rental adjustments, broader factors influence the luxury property market. “That’s why there is quite a lot of supply,” said PropNex’s Mr Wong.
The shift in rental prices is attributed to a more cautious market environment following the government’s crackdown on money laundering cases.
Hardington’s Ms Wong notes that budgets in the S$50,000 to S$60,000 range, which once catered to C-suite executives of multinational firms, are becoming less common.
Budget constraints have tightened, with top expatriate executives now looking at the S$20,000 to S$30,000 range, varying by industry. High-level embassy staff and top multinational executives might still be able to afford S$30,000 to S$50,000.
Those willing to pay S$60,000 to S$120,000 typically include ultra-high-net-worth individuals setting up businesses or family offices in Singapore and “not your typical tenants.”
Mr Alan Cheong from Savills Singapore says tenants paying monthly rents between S$80,000 and S$120,000 often want to buy the property once they become citizens.
He explains, “They are likely to have applied for their citizenship and are waiting for it to be approved before they purchase. These are people whose money is kosher.
They could be billionaires from China, Hong Kong, Taiwan, Indonesia or other parts of the world.”
Mr Cheong calls this move a ‘lock-in’ and says it’s because of rules about property buying. “The 60% additional buyer’s stamp duty [ABSD] for foreigners is motivating them to do that,” he said.
For example, if they buy a S$60 million property, the extra tax is S$36 million, plus a 6% tax, making the total cost S$99.6 million.
Changes in property tax this year, which rose from 12% to 36%, mean landlords are less likely to drop rents. “The result is that rents will be more sticky downwards,” he added.
Rising property taxes and maintenance costs, particularly for conservation bungalows, are also influencing the decline in GCB rentals.
For example, the Cable Road GCB owner faces over S$200,000 annually in property taxes and higher upkeep expenses due to the property’s timber features and the need for regular repainting.
Thus, while rental rates have decreased, landlords must balance competitiveness in a muted market with covering rising costs.
While rental rates have decreased, properties like the Cable Road GCB continue to hold intrinsic value, coveted for their exclusivity and prestige in Singapore’s real estate landscape. /TISG