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?

Resale HDB flats in 2014

As the markets quieten down for the year end, one may wonder what the new year will bring. More new private homes? Or perhaps a revival of the resale HDB flat market which has seen less action especially in the last quarter of 2013?

For the first half of 2014 at least, sales transaction of resale HDB flats are not expected to soar. In fact, it might be the second year in a row, following 2013, with the least number of sales in the last five years. Usually the average number of transactions a year come up to between 24,000 and 37,000, but this year, the numbers may fall below the 20,000 mark.

HDB flatsOne of the main factors behind the dip could be the restrictions placed up PRs (permanent residents) buying HDB flats. Following their receipt of the PR status, they are now required to wait 3 years before being able to purchase a public housing unit from the resale market. But this may in turn drive up the rental demand, thus once again this may turn the market on its heels and redirect interest into the rental and private property market. Are more investing in private properties in order to ensure quick returns through rental yields? And could this be the trend for 2014?

As more new BTO flats are made available to first- and even second-time applicants, the lure of resale HDB flats may weaken even further. Location and space could the resale market’s plus points however. And as HDB holds back on its building schemes and reduces the number of launches next year, the buying crowd may once again consider resale flats more seriously. And industry players are more positive about H2 of 2014 as the low selling prices and COV (cash-over-valuation) attract buyers back into the market.

More smaller HDB flats to be built

Though the supply of HDB flats may be reduced starting next year, National Development Minister Khaw Boon Wan has said that these may apply only to the larger four- and five-room flats. Smaller two-room and studio flats will still be steadily supplied in the coming year or two.

5,000 new two-room flats are targeted for 2014, and since response from singles applying for new HDB flats have been overwhelming, with 58 applicants for 1 unit since the scheme began in July this year, this will be greeted with much cheer.

bto-families-ft-st-b2
Photo Source: Ministry of National Development.

Some larger HDB flats will also be made available to second-time applicants. But this shift in supply is to balance out demand for BTO (build-to-order) flats between singles and families. And since demand from families have mostly been met, the shift to releasing smaller units will allow for more success from other applicants such as singles, divorced families and young couples.

Is this halt to releasing larger HDB flats an effective way to adjusting the dynamics in the housing market? Will there be a kickback reaction in the private property market? What is the percentage of the population who are able to afford private housing and will that percentage increase five years down the road or will the building of HDB flats continue to dominate much of the nation’s housing supply?

Reduced BTO launches will not affect resales market

2013 was a year of new BTO HDB flats. With a sales launch almost every couple of months, it may have taken the shine off resale HDB flats. Coupled with the decreasing COV prices, will this mean a a weakening resale market?

National Development Minister, Mr Khaw Boon Wan recently announced that starting 2014, HDB’s “massive construction programme” will slow as the pent-up demand for public housing units have been largely elevated by the continuous supply of BTO flats over the past 3 years. Industry analysts are not expecting the resale market to be overly affected by this announcement, especially since the pool of buyers usually have different motivating factors. Most BTO flat applicants are young families and first-time buyers. Now that application rates have fallen from 5.3 to 2 in 2 years’ time, there seems reason enough for the authorities to put the brakes on the building programme.

East Lawn Canberra HDB FlatIn comparison, the resale market has suffered slightly, with stricter loan limits, competition from the private property market, and recent COV prices have come to show for it. With the median at an all-time low, many are wondering if the cease of supply of new HDB flats will once again bring resale flat prices up. But this may be unlikely, at least for the next half year or so. As long as the loan limits and private residential options remain and especially since demand has been largely fulfilled,

It will be an interesting year for Singapore’s real estate sector. Which way will the wind blow?