Higher success rates with HDB priority schemes

More BTO (build-to-order) HDB flat applicants have been successful in securing their units of choice at recent HDB sales launches. Under the Parenthood priority scheme, the number of married parents applying for a unit have dropped from 10,000 to 8,000 last year.

BuangkokParkVista_HDBWhat could this mean for the resale HDB flat market? As property prices drop, more HDB flat buyers may widen their options here, instead of heading straight for the new HDB flats. Some may have location considerations, especially if they have elderly parents or young children preparing to enter specific primary or secondary schools.

In 2013, 26, 494 new HDB flats were released.  But as the supply of BTO flats decrease, dropping to 16, 900 this year, and as most first-time HDB flat applicants successfully receive their flats in time for family-planning; the number of applications under these priority schemes look set to fall as well. Many of these new flats could be in non-mature estates. But as mature estates reach a saturation and before these non-mature estates reach maturation, will resale HDB flats  and private properties be the way to fill in the gaps for buyers looking to live nearer their workplaces, elderly parents or children’s schools? Will temporary rental of condominium apartments or even HDB flats be a stop-gap for this group of home seekers; and will that be an opportunity for investors and landlords of properties near schools and MRT stations?

Applying for a HDB loan – Do it early

If you’ve been waiting for ages to qualify and apply for a HDB flat, the housing development board has advised against last minute loan applications.

Not only does the process help you get a firm grip on your finances, it also helps give you a better idea of how to plan for the future. A HDB loan eligibility letter will tell you how much you are able to loan from the Housing Development Board (HDB) should that option be your mortgage financier of choice. Some buyers may opt for a bank loan instead.

MacPhersonSpring_HDB

Photo credit: HDB

But if you’re buying a BTO flat directly from HDB, they will require a HDB loan eligibility letter when booking a flat. This is to prevent buyers finding themselves in a bind, unable to acquire sufficient loans after they have already booked a flat. Previously, they were only required to have the HDB loan eligibility letter when signing the Agreement for Lease which could be a number of months after booking a flat.

Though this may not affect those looking to purchase a resale HDB flat, some buyers who may original be considering a BTO flat may change tracks and also consider resale options should they qualify for a higher loan quantum. Will this then be a boost for the resale HDB flat market?

The latest BTO launch in February consists of flats, including larger 3Gen (3-generation) flats, in non-mature estates such as Bukit Batok, Housing and also the mature estates of Geylang. The new McPherson Spring flats in Geylang are situated near the MacPherson MRT station and may be the first to be booked up. For singles who are now able to purchase 2-room BTO flats directly from HDB, those in Housing may be hot property. Applications will close on Tuesday and it may be some time before the next launch in May.

Interest in Executive Condominiums wane

Just awhile ago, the interest in executive condominiums (ECs) was red hot as pent up demand for these sought-after properties was released after a long hiatus. In areas such as Jurong, which had not seen a new EC launch for 17 years, the response was promising.

This interest has however diminished very quickly. In the latest EC launch, only 18 per cent of the units launched have been sold. Out of the 378 units in The Amore EC in Edgdale Plains, only 70 were sold at its launch last weekend. Prices averaged at $800 psf. A similar property nearby, The Terrace executive condominium, which was launched earlier last month, has only had approximately 20 per cent of its 747 units sold at a median of $812 psf.
TheAmoreEC_1Photo Credit: www.amore-ec.com

Bellewaters EC in Sengkang and Bellewoods EC in Woodlands fared similarly, with the only development bucking the trend being The Lake Life EC in Jurong West. Most of the units at The Lake Life sold within the weekend of its launch in November 2014. The sudden demise of interest in ECs came unexpectedly as even within last year alone, there was a good 9-month wait before any new EC development was launched and a rise in sales figures after a long wait is the norm.

Property analysts are putting this slowdown on the increase supply of BTO (Build-to-order) HDB flats, declining resale prices which have made resale HDB flats more affordable and the 30 per cent Mortgage Servicing Ratio (MSR) which was implemented in December 2013.

Moving ahead in 2015, 10 more new EC launches are expected and sales may be slow as future ECs will require a resale levy tax and competition heats up within the same location. As seen by recent numbers, areas with a higher concentration of ECs tend to fare more poorly in terms of sales volume.

Resale HDB flats prices dip

The number of resale HDB flat buyers is diminishing. At its two-year low last month, the number of flats which exchanged hands in May was 1, 320. In April, 1, 484 resale flats were sold. Prices also fell 1.2 per cent in May, the lowest since April 2012 according to the Singapore Real Estate Exchange’s (SRX) price index.

Marsiling Greenview BTO HDB FlatThe most common reason for the drop was the loan curbs. This has prevented many buyers from securing a desired loan amount, thus unless they have a large enough cash reserve, it usually puts a resale flat out of sight. The number of transactions in March and April were more positive but that could be due to the pent out demand following the festive season in January and February. Other possible reasons for May’s drop could be the release of new BTO and SBF (sale of balance) flats by HDB in the same month. The latter SBF flats are usually more popular with location- and price-conscious buyers as they are cheaper than resale flats but yet are situated in mature estates.

But what about HDB upgraders who are have purchased private properties? Unlike private property owners who are not allowed to purchase HDB flats, HDB flat owners are allowed to purchase private properties. But as buyers play the waiting game, resale flat owners are now simply willing to wait, if they can, or rent out their HDB flats. This in turn keeps rental supply high, but that also means they will be likely to compete with private property rentals. As the supply of tenants are kept stable, this could also mean there will be a price-war in the rental market.

How long will the resale market remain weak? Will it be a tough uphill climb?

HDB resale flat sales flat

Prices and sales of HDB resale flats have not gone down that drastically, though COV prices are now almost non-existent, but they have remained flat for the last quarter.

April marks a slight rise in the number of resale flats sold, 4.4 per cent up from March. This could be a sign buyers are coming back to the market after having observed the market for almost 3 quarters now and having held out in wait of market stability. As the frequency of BTO flats  launches slow down, buyers who are still in search of a flat which suits their needs, may it be price, location or size, could be more willing to purchase on the resale market now.

Resale 5-room HDB flat on King George's Avenue with asking price of more than $700,000.

How will the HDB market perform in the upcoming months? Analysts and experts are expecting prices to fall very slightly before stablising in the third quarter of this year. Overall, prices for most HDB flats fell, with the exception of executive flats of course. A 1.2 per cent rise was recorded for that sector.

With rents also coming down, mainly due to the decreasing demand as the foreign workforce diminishes, buyers of HDB flats are also more likely to think of their purchase as a long-term home occupation investment rather than to count on profiting from rentals.

The second half of 2014 and the first quarter of 2015 would be an interesting time for the HDB resale flat market, a time to find their footing and possibly find ways to turn itself around.

More going for BTO flats

Or so the numbers show. January marked the first launch of HDB’s new BTO flats for 2014, each new flat were oversubscribed by 1.6 times for first-timers and 3.5 times by second-timers. The location of these new launches were the main draw – two projects were situated in Punggol and many young couples and families were excited about the new waterfront living in this new town.

Matilda PunggolPhoto source: URA

Development and expansion in Punggol have been rapid, especially since it has been earmarked as the Punggol 21 township development plans under URA’s Draft Masterplan 2013. It promises to deliver a waterfront lifestyle living deep inland when previously only the outskirts, mainly in the East, of Singapore had the privilege of these sort of housing options. Although it may take some years yet before it is fully developed, the next decade may shift the focus into this area and as more families bring up their children there, no doubt popularity of its properties will also increase. And buying early may be the wisest choice yet. Private properties in the area include Ecopolitan, Watertown and Rivertrees Residences and executive condominiums such as Waterwoods, Prive and A Treasure Trove. It will be interesting to see which other new launches may move into the area this year.

Rivertrees condoAnd since HDB’s policy change in July last year, singles are now able to purchase 2-room flats directly from HDB and the subscription rate is a high 27.7. But the government has committed to offering up to 5,000 of such flats this year, with 30 per cent reserved for singles. There may be even more left in the basket for singles as the number of families going for 2-room flats are on the decline. Will this mean a change in the demand for 3-room resale HDB flats?

BTO supply shrink

2013 was the year for new properties, private and public. Bumper crops of new BTO HDB flats were launched almost every two months and an average of 4,190 units were offered up at each launch. In the first launch this year, the number was a reduced 3,139 units.

Although smaller in number, HDB is happy to offer eco-friendly features in their latest launch such as motion-sensor lighting and recycling chutes. New BTO flats were offered across Bukit Batok, Jurong West, Punggol, Woodlands and Serangoon. Prices ranged between $73, 000 for 2-room flats to $433, 000 for 3-Gen units. 3-Generation flats are mainly four-room HDB flats reserved for married applicants submitting purchase requests with their parents.

Bukit Gombak Vista

Photo source: HDB

National Development Minister, Mr Khaw Boon Wan, has announced last year that BTO supply will be reduced this year as demand has been mostly satisfied. The authorities are however considering offering more 2-room flats as singles aged 35 and above are now eligible to apply for new HDB flats. Previously they were only allowed to purchase off the resale market.

As expected, Wednesday’s launch saw the most activity in the 2-room flats department. 5, 000 of these smaller units will be made available through out this year. 455 studio apartments in Jurong West were also included in the current launch. There will be a decrease in the number of three- to five-room flats however.  It seems the authorities are working hard to cover all ground and assuring citizens a fair chance at owning a home.

HDB Priority Schemes have helped thousands

A bumper crop of new BTO flats were launched this year. And correspondingly, a bumper crop of young couples, families and even singles received assistance from HDB’s various priority schemes and grants.

2 of the priority schemes aimed at helping young couples set up families are the:

Flat allocation under HDB's Parenthood Priority Scheme. Photo by HDB.

Flat allocation under HDB’s Parenthood Priority Scheme. Photo by HDB.

Under the Parenthood Priority Scheme, 30 per cent of BTO flats 50 per cent of HDB flats under the SBF (Sale of Balance Flats) are reserved for married couples with a child below the age of 16. And whilst waiting for their new flat to be built, these families are able to rent HDB flats directly from HDB under the Parenthood Provisional Housing Scheme. The scheme was extended to also include divorced and widowed parents and one year since its implementation, would have helped almost 10, 000 families. Might these moves give young couples the final push into marriage or parenthood? What are the younger generation’s views on marriage and parenthood and are there more considerations besides housing?

Admiralty Grove HDB flatNow that majority of the first-time HDB buyers’ needs are satisfied, the authorities will turn their attention to building more 2-room flats for singles. Starting from July, they are now able to purchase new flats directly from HDB, with some criteria to be fulfilled. Is this good news for singles? How likely are they to go for new 2-room flats as opposed to resale 3-room or 4-room flats? What if they were to get married, what should they do to upgrade for a bigger flat?