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.

Resale HDB flats shrink in number

You may think that with the number of new properties being completed within these couple of years, more HDB upgraders will be in a hurry to sell. But as the figures show, fewer resale HDB flats are put out there in the market as many choose instead to hold on to their flats in wait of the market upturn.

The quicker rise in prices of private mass-market homes could also be part of the reason for this inertia to upgrade. Prices of condominiums have risen 4.8 per cent and coupled with the decreasing ability to receive and maintain a realistic home loan, many may have given up their plans to upgrade, at least temporarily.

Bukit Batok HDB FlatBut it is just as well, since demand for HDB resale flats has also fallen, especially since singles are now able to purchase new flats directly from HDB and permanent residents now have a 3-year waiting period after receiving their PR status before being allowed to purchase a HDB flat.

The first sign of the decline in demand was shown in the COV figures. From a 6-figure sum just not long ago, it is now at a zero median in February this year. Some have even been reported to have sold below valuation price.

It is uncertain how long this lacklustre situation will last, but at least for this year, the market seems relatively quiet.

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.

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?

HDB’s 3Gen Flats – More opt to live with parents

Married children usually choose to move out of their parental homes, preferring to build a new home of their own. But now with HDB introducing 3-Generation flats which aim to promote multi-generational living, the trend might veer the other way.

Although the offering is limited, with HDB only rolling out 84 such flats in Yishun to test the waters, they might consider bringing more to the table in the effort to promote the continuation of multi-generation households. These 3Gen HDB flats are about 5 sq m larger than the usual 5-room flat offerings put out by HDB, and they have four bedrooms and three bathrooms.

Saraca Breeze Yishun HDB flat2The September launch saw 1, 152 applications for these 5-room HDB flats, with one third coming from multi-generation households. Although the HDB previously has a Married Child Priority scheme, only 3 per cent of applicants chose to buy HDB flats under this scheme. In fact second-timers made up bulk of the applicants, a strong indication that preference is for more mouths living under a bigger roof.

As Singapore’s population heads towards saturation, and at the same time, age significantly, HDB might have to think of new schemes or new types of flats to suit different households and a large variety of needs. Will such flexibility be possible or will it take a toil on the authorities and also the taxpayers?

Rethink Resale

The foothold resale HDB flats has on the real estate market here, may now be a little shaky. HDB’s resale price index has indicated a 0.7 per cent fall in Q3.

Earlier this year, rules for Permanent Residents (PRs) purchasing HDB flats were changed. They now have to wait 3 years from the time they receive their permanent residency status before being able to buy a resale HDB flat. This may have cut off quite a substantial number of potential transactions in the resale HDB flat sector, but may also have pushed up sales volume in the private property market.

Saracca  Yishun BTO flatFor HDB flat sellers, maybe not such good news. HDB flat transactions have dropped to a 16-year low. The introduction of a new scheme where singles are now able to purchase new 2-room flats in non-mature estates directly from HDB, could also have been a contributing factor to the dip.  But perhaps smaller flats are still finding interest. The bigger, well-located flats may be more difficult on the pockets of potential buyers, especially with the recent loan curbs. Money is now not as easy to come by, and that could have posed restrictive on buying ability. COVs for these larger units have fallen to around $18, 000. The average in January this year was $35, 000.

What does this show and is it a sign of positive times to come? What will become of the resale HDB flat market in 2014 and will this dip continue as more new BTO flats continue to be launched?

HDB flats median COV lowest in 4 years

Not too long ago, COV (cash-over-valuation) prices of resale HDB flats were the talk of the town. Red hot and almost scorching. Burning holes in the pockets of buyers.

But now, median COV prices have dropped $2,000 from the previous average of $20, 000 in July. In January this year, it was at a thundering $35,000. And since April, resale HDB flat prices have also fallen 4 months in a row. It is speculated that most of the drop is due to January’s loan curbs which restricted the percentage of monthly income which could be used to pay off home mortgages.

Waterwoods Punggol ECIn addition, starting from July, singles were able to apply for new BTO flats directly from HDB and from the overwhelming response to the initial launch, many may have withdrawn from the resale HDB flat market. The lowest COV prices were for bigger HDB flats in the outside-of-central HDB estates. An executive condominium (EC) which was put for sale in the resale market in Punggol only had a $13,000 COV premium. At the other end of the spectrum, popular mature estates such as Bishan and Queenstown continue to command high COV prices. One of the highest recorded COV prices for a bishan flat was at $120, 000.

As the number of resale HDB flats being sold dip, the market is kept on its toes about whether COV prices will continue to drop as the supply of new flats and private properties continue to enter the market or will the potential resurgence of home prices once again cause a peak in COV prices as resale HDB flats seem the more advisable option?

HDB Goes Big

With 3 upcoming projects. Waterfront living. Integrated hubs. Sandy beaches. Regional hubs. These are but a few of the amenities which will await new HDB flat owners in Bidadari, Tampines North and Punggol Matilda.

Future Homes Better Lives35, 000 public housing units and 5, 000 private ones will be released over the next 10 to 15 years. That’s quite a bit to consider if you’re planning for the long-term and if you can afford the waiting time. Much of the focus of these new estates is on healthy living.

Here’s a quick look at what each new HDB project will potentially provide:

Bidadari :

  • 10, 000 new HDB flats
  • Man-made lake
  • 10-hectare park
  • Pedestrian walkway with canopy of preserved heritage trees

Tampines North:

  • 17, 000 new HDB flats
  • New integrated shopping mall cum  bus interchange
  • 2 new parks
  • Pond with sandy beach

Punggol Matilda:

  • 8,000 new HDB flats
  • Elevated landscaped deck with verandahs, colonnades and pavilion modeled after the iconic Matilda-House
  • New waterfront shopping mall

MND BTO HDB flat exhibitionAnd to boost community bonding, each estate will have a number of community gardens which will also promote healthy living where residents can grow their own produce. Carrying the green thumb message even further, cycling pathways, separate recycling chutes and energy efficiency features will connect the dots in HDB’s plans for new and improved future estates.

Already 500 units at Punggol Matilda will be available in September’s BTO launch. More will go on sale at Tampines North in 2014, followed by those in Bidadari in 2015.