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?

Median COV on the fast decline

It was not too long ago that Cash-over-valuation (COV) prices for resale HDB flats dominated the headlines. The rarer and more highly-in-demand the unit, the higher it went. HDB flats were being sold at close to the million dollar mark, with a few pulling ahead and making it across.

But the weakening property market has meant a dip in demand in resale flats and sellers now find themselves lowering their asking COV prices, or even selling prices, especially if there is some urgency involved in selling their HDB flat. From the median of $11, 444 in October, COV prices are now at $8, 000 in November. There were expectations that it will regain its foothold at $10, 000 by year-end. But the future seems a little foggy at the moment.

HDB Flats THinkStockPhoto source: ThinkStock

What are the factors causing this decline? And will these reasons resolve themselves in the new year?

  • Housing curbs. Stricter loan limits means buyers now have lesser to spend and affordability of their property purchases will now take priority in their decision-making process.
  • Less demand for resale units overall. As new private properties launch at an increasingly rapid pace, with smaller units available at lower prices, the popularity of public housing may continue to wan.
  • Less demand for resale units in popular estates. As more BTO flats are rolled out, with some in mature estates, buyers may be drawn to apply for these instead of buying a unit off the resale market, especially if they are not in a hurry and location is not as crucial a deciding factor.
  • Increasing number of HDB upgraders. As suburban condominiums become a more viable and popular option, there may be more HDB upgraders looking to sell their flats in order to purchase private, but this would also mean a growing pool of sellers looking to let go of their flat and hence diluting the intensity of the market.

Considering the fact that July 2009 was the last time COV prices fell below $10,000, the recent $8,000 mark could be one of the lowest in the last five years. In fact, some sellers are now offering their units for sale without any cash premium, and even at prices below valuation. But these cases could be few and far in between as resale units in popular HDB estates are still rare and may fetch reasonable prices.

COV prices no more?

In fact, some sellers are even letting their HDB flats go at below valuation. Once a highly-debatable amount, these cash-over-valuation (COV) prices are now almost all gone, or miniscule at the least. Although these amounts are set by the seller, above the HDB valued selling price, it is usually a good indication of how popular a unit is, and whether the seller was looking to earn some bucks from the sale. But recent mortgage rules have affected the demand for resale HDB flats and according to HDB, in October alone 105 units were sold at less than their HDB appraised price. This is a significant number, especially as its a good 6.7 per cent more than the earlier half of the year. .

Book Lay View HDBThe mid-year announcements by MAS of stricter mortgage terms such as the introduction of the TDSR (total debt servicing ratio) and shorter loan periods have left many buyers reconsidering their property purchase more carefully. In addition, Singapore permanent residents now have a 3-year wait before being able to purchase a resale HDB flat. In January, the median COV stood at $35, 000. In October, it has fallen to $12, 000. Many sellers who have held on to their COV asking prices, have had a long wait, and some have given up and reduced their COV prices.

Areas where a larger amount of new HDB flats are being launched, such as Punggol, Sengkang and Chao Chu Kang, are harder hit as the buyers of resale flats in these areas will be diverted. BTO (build-to-order) flats are considerably cheaper than their resale companion. As singles and young couples are now hampered by a lower loan percentages, 30 per cent of their gross monthly income, many are no longer able to afford high COVs, even if they truly liked the unit. And as the building of new HDB flats are happening in quicker cycles, many BTO flats which are now eligible to be placed on the resale market after their 5-year MOP (minimum occupation period) tenure, will have to compete with more new flats nearby. As some families are keen to move to be near their children’s schools or because of family situations, there may be more resale flats going at or below valuation. How does this impact the HDB flat market in 2014?