Posted by goldenpeace on 30-Mar-2009
Housing budgets at the top end have been slashed, but limited supply make these black-and-white bungalows built during the British colonial periods in the early 1900s coveted lifestyle homes for expatriate familiesJUST LAST MONDAY, Brandon and Gabrielle Batagol, together with their three young children, Zac, nine, Mathilde, seven, and Brigitte, four, moved into their brand-new black-and-white bungalow on Tanglin Road. Originally from Melbourne, the family had been living in a serviced apartment at Great World for the past two months. Brandon is a shareholder and director of one of the leading dairy trading companies in Australia. He was the founder and managing director of the company before moving to Singapore to expand the company’s Asian business.
Black-and-white bungalows were built during the British colonial period in the early 1900s, and are characterised by their sprawling gardens, white-washed exterior walls with black timber frames, arched driveways and spacious interiors with high ceilings and wood flooring. And, they are much sought after by expatriate families.
It appears they are one property type that is still relatively resilient in the current market downturn, unlike condominiums. Listening to the Batagols, one understands why. “It’s a dream,” says Brandon, gesturing at his new home. “But you have to be lucky because they don’t become available too often. It’s all about demand.”
After looking at almost 100 homes since last September — ranging from apartments to good class bungalows (GCB), and black-and-white bungalows, Gabrielle says, “I was open to anything, but I kept coming back to the black-and-whites.” In their first attempt last month at bidding for such a bungalow under the SLA open-bidding system, the Batagols did not secure the bungalow at 30 Malcolm Road — three of the top five bids came in above $20,000. When the next property — the black-and-white on Tanglin Road — came up for bidding, the Batagols had already done their research and armed with their earlier experience, secured the bungalow with the highest bid of $20,189 a month, according to the SLA open bidding results (see table).
SLA introduced the open-bidding system for new tenancies of its residential properties in late 2007 to increase transparency. When its residential properties become available for rent, they are posted on the SLA website. Rental rates are determined by market forces with guide rents provided to assist bidders, says Teo Cher Hian, SLA’s director of land lease (private) division. Prior to that, tenancies were awarded on a first-come first-served basis under a waiting list or balloting system.
“State-owned black-and-white properties are a unique product in the residential market,” says Teo. Also, they are in very limited supply, with just 300 units scattered across Singapore today, mainly in Adam Park Estate, Alexandra Park, Lornie Road, Seletar Airbase and Sembawang. Demand for such bungalows has remained relatively healthy and their occupancy rate is still over 90% today.
Despite the current market scenario of softening rents, the blackand- whites continue to see “good response”, says DTZ, the marketing agent for the black-and-white bungalow at 25 Nassim Road. It was put up for lease in the open bidding system, with bidding to start on March 30 and closing on April 3. The guide rent is $13,500 a month. Gabrielle says some of her friends who have visited her new house are now looking to bid for the one at Nassim.
RENTAL STABILITYApart from their charm, the other draw of black and whites is that, being state-owned, their rental rates are perceived to be more stable than those of houses that are privately owned. “What we heard is that with SLA as the landlord, they are much more understanding and much more realistic,” says Brandon. “So, even in a down market, the rate would be adjusted downward accordingly, and conversely, in a rising market, rentals are not going to jump by 100%, so it’s much more secure.”
Brandon, who has many friends who have already lived in Singapore for the last three to five years, is familiar with the story of expatriates’ rental woes when the property market was booming two years ago. “What happened to them was that they would have a lease of, say, $10,000 for two years, and when the lease was up, their landlord would increase their rent by 70% to 80%,” he says. “So, a $10,000-a-month lease suddenly became $18,000 a month, and they couldn’t afford it. Or, some of them had $20,000-a-month leases, and suddenly it was $35,000 a month and they had to move out.”
The Batagols have also done their research on how much they need to invest in their new home and budgeted how much it will cost to maintain it. Having friends already living in such black-and-whites also helps. Many of these houses have just basic lighting and ceiling fans. The new tenants have to install their own airconditioning units, wardrobes for the bedrooms, water heaters, telephone lines, Internet connection, swimming pool, pool deck and gazebo. “We’re investing in a lifestyle,” says Brandon. “We can’t do this in Australia, and even in Singapore, it’s unusual as well.”
One drawback about living in a black-and-white house is that after investing in all the fittings, when the tenants leave, they are required to reinstate the house to its original condition — that means removing the airconditioning units, the water heaters, the phone connections, and even the swimming pool and pool deck. For instance, the same company that installed the swimming pool for the previous tenants, and then took it out, is back at the house installing a bigger pool for the Batagols. “We’re spending quite a bit of money to make everything good quality, and when we leave, an option would be to sell it to the new tenants,” says Brandon. However, that’s subject to an assessment by one of the three agents appointed by SLA — EM Services, DTZ or United Premas.
There is also a cluster of 33 such state-owned black-and-white bungalows in the Mount Pleasant area, and these are managed by The Ascott Group, the serviced apartment arm of CapitaLand. Called The Heritage, they also continue to see strong demand “as they are rich in character and history, and are set in a lovely environment”, says Gerald Lee, CEO of Ascott Hospitality, the hospitality management arm of The Ascott Group. Given the limited number of such bungalows, they are popular with diplomats and senior executives of MNCs, says Lee. According to him, like the other black-and-whites elsewhere, those in Mount Pleasant also enjoy close to full occupancy.
Instead of a softening in rents, Lee says, rents have increased for renewals — some by “double-digit percentages”. However, he points out that these double-digit percentage increments were mainly for renewal of tenancies signed in 2005 and 2006, when rental rates were still relatively low. Current montly leases for the bungalows in the Mount Pleasant area are said to range from $20,000 to nearly $40,000.
Rental rates at Mount Pleasant are said to be based on various factors, including benchmarking with SLA’s black-and-white bungalows of a similar category and location, as well as demand. “We will monitor the market closely before making suitable adjustments to rents,” says Lee. “These black-and-white bungalows have a charm of their own,” says Sandy Sin, head of corporate leasing and the Regal Homes team at Knight Frank. “Many are homes to the CEOs of multinational firms.”
GCB RENTS DECLINEThe number of black-and-whites is dwindling as they are being torn down to make way for new construction — for instance at Seletar to make way for the Seletar Aerospace Park, an industrial park for aerospace companies. Hence, the number has been reduced from 500 to 700 such bungalows two years ago, to just 300 today.
The closest comparison to the black-and-whites in the private-housing market are GCBs, which have a minimum land area of 15,070 sq ft. There are around 2,000 to 2,500 GCBs today, and the number will only increase through the subdivision of larger GCB plots. Housing agents in the GCB market are seeing housing budgets for senior expatriate executives being slashed as well. This is especially noticeable when leases come up for renewal, says Knight Frank’s Sin.
For instance, those currently staying in palatial GCBs with rents of $30,000 to $32,000 a month are now looking at rents of $25,000 to $27,000 a month. Meanwhile, those currently paying $25,000 to $28,000 a month are looking at the $20,000 to $22,000 bracket. “There are very few who are now looking at rents of $25,000 and above,” she says. “The most common is now in the $20,000 to $22,000 range, and even that number is limited.”
SLA’s Teo is of the opinion that it isn’t appropriate to compare state bungalows with privately owned GCB as they have different attributes and, unlike the GCB market, “we have not discerned any significant changes, neither in the demand nor the bids for them”.
In the Gallop area, a GCB with land area of around 16,000 sq ft and builtup area of 5,500 sq ft to 6,000 sq ft is still asking for $28,000 to $30,000 a month in rent, while a GCB of similar size in Cornwall Gardens is asking for $26,000 a month, says Knight Frank’s Sin. “We’re trying to manage the expectations of GCB landlords and preparing them to accept lower rents, especially for leases that are coming up for renewal,” says Sin.
Patrick Lai, associate director of corporate residential leasing at Savills Singapore says he hasn’t seen a significant drop in demand for GCBs among senior expatriate executives yet. Just two weekends ago, he closed on the lease of a GCB with a land area of 16,000 sq ft in Mount Echo Park for close to $30,000. In February, he also housed a new expatriate tenant in a GCB on Swettenham Road with a monthly rent of $30,000. The highest rent he’s ever transacted was for a GCB in the Holland area that was leased at $45,000 a month just last September. It was a lease renewal from $27,000 a month previously, says Lai.
Lai predicts rental rates of GCBs will drop 15% this year. However, he does not see rental rates of GCBs nosediving the way it has for luxury condominiums. “The bottom line is that it all boils down to demand and supply,” he says. There are a limited number of GCBs, and therefore they will be able to hold better in terms of rents, reckons Lai. In contrast, newly completed condominium projects yield several hundred new units each, with numerous landlords competing for tenants. “And, that immediately puts pressure on rental rates.”
State-owned black-and-white bungalows are even more niche, and the rents for such bungalows of the same size are generally lower than GCBs in the same location, concedes Savills’ Lai. However, with asking rents of GCBs softening and 15,000 sq ft to 16,000 sq ft GCBs now asking for $22,000 a month versus $27,000 six months ago, “tenants have more choices than before — it’s a tenants market now”, says Lai. “Two years back, and even a year ago, it was still a landlord’s market,” he adds.
With expatriate housing budgets having dropped about 20% this year, “it will all balance out,” says Lai. “For sure, housing allowances have been adjusted downward, but [landlords’] sentiments and expectations have also been revised downward.”
To Lai, the litmus test on the health of the GCB market will be in June, which is the end of the school year for international schools. “I expect to see some movement then,” he says. For the black-and-whites, it will be when leases come up for renewal.
As for the Batagols, the family is looking forward to settling into their new home in Tanglin with its 5,457 sq ft double-storey house, a sprawling 59,202 sq ft garden and a brandnew swimming pool. “It’s a dream come true to have a house with a nice big area with a lot of green, where the children can run around or cycle when they come home from school,” says Brandon.
Source : The Edge - 29 Mar 2009
