HDB property market – Has balance been struck?

The last four years saw aggressive moves by the Housing Development Board to release and build new HDB flats. In 2014 alone, 51, 598 new HDB flats were added.

Has this supply of new flats been effective in stabilising the property market? Is the supply and demand scale now balanced? Minister for National Development, Mr Khaw Boon Wan, has mentioned that the increased supply has helped move the selling price of HDB flats down, yet at a gradual pace and margin which buyers are still able to stomach.

WEst Rock HDB FlatFrom this year on, the number of new HDB flats will begin to decrease, from 50,796 this year to 38,316 in 2018. Which could mean that this year might be the watershed year for the HDB market. Will buyers be taking the opportunity to purchase before supply becomes tighter once more? Or will the number of HDB flats which have been released thus far be able to provide for a stable resale market, keeping a level playing field between buyers and sellers?

As Singapore grows in population size, and global and domestic economies fluctuate, all this would also be tightly linked to population and immigration policies. With the election possibly coming our way next year, buyers may take the chance to look out for opportunities to upgrade property-wise this year, or perhaps wait and see what the post-election changes may bring.

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.

Resale HDB flats – The 2015 outlook

Across the board, property prices dipped slightly last year, and it was the same in the resale HDB flat market. The last month of 2014 showed a 10 per cent fall in prices, and the Minister for National Development, Mr Khaw Boon Wan, has mentioned an estimated single-digit drop in prices this year.

SeaHorizonECResale flats in mature estates are however holding their own. Prices remained resilient mainly due to the rarity of units in these saturated estates and good locations. In non-mature estates such as Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands and Yishun; resale flat prices fell 0.9 per cent in December, while a rise of 0.2 per cent was reflected in the mature estates sales figures.

The price decline was mainly attributed to stricter mortgage servicing ratio limits and a tightening of immigration  policies. Singapore permanent residents are now required to wait 3 years before being allowed to purchase resale flats.

But it were the larger four- and five-room flats which experienced the fall more than three-room resale flats whose prices remained level. And on the higher end of the public housing spectrum, executive flats prices rose 1.8 per cent. As a rare commodity, a hybrid which crosses smoothly from public to private housing, executive condominiums are much sought after. Though the recent close launches of a few EC projects are the same time may have reduced the percentage of uptake per development.

Industry experts are expecting sales to remain low in the first 2 months of 2015, and pick up after the Lunar New Year, perhaps even a slight rebound in the later half of the year.

2015’s HDB resale property market

Following the hash of cooling measures implemented and enforced over the last couple of years, prices of resale HDB flats have been on the decline since 2014. The dip may continue this year, and into 2016 but at a manageable rate. A fall of 5 to 8 per cent is expected this year, similar to the last.

Sembawang Breeze HDB

Photo credit: HDB

A look back at the past decade will see a huge and quick rise of resale flat prices since 2006. Some flats were even looking at a 95 per cent rise in prices. Much of the price rise was effected by the COV (cash-over-valuation) system. Since its removal last year, prices have began to fall, though very slightly.

What are the factors leading to this fall in HDB resale flat prices?

  1. A increased supply of BTO (build-to-order) flats
  2. Lowered MSR (mortgage servicing ratio) with a loan tenure period limit of 25 years (down from the previous 30 years)
  3. Allowing singles to apply for 2-room HDB flats directly from HDB instead of on the resale market
  4. Making it easier for second-timers to purchase directly from HDB
  5. A 3-year waiting period for Singapore Permanent Residents (PRs) before they are allowed to purchase HDB flats

Sellers and buyers may have taken 2014 to get used to the new measures and the price adjustments certainly showed as such. But 2015 could be the year where buyers come back into the market as prices become more palatable, and transaction volumes may be boosted by HDB’s scaled-down BTO supply.

For sellers, the dip may not be such a bad thing, yet. The price decline is fairly gentle and with the current prices, they will hardly make a loss, just not as much of a gain as before. It could be a win-win situation for all if the timing is right.

No halting Tanglin Halt resale HDB flats

Ever since the announcements of redevelopment plans for the Tanglin Halt HDB estate, prices of resale flats in the area have been heating up. And a good many flat owners are taking the chance to put their unit up for sale. There are about 30 units available on online property websites alone.

HDB flats in Queenstown

HDB flats in Queenstown

What did the announcements say? That the flat owners of the current units will be offered brand new flats in Dawson estate in Queenstown under the SERS (selective en bloc redevelopment) scheme. And since most property owners are aware of the popularity of Queenstown’s resale flats, the SERs scheme is the best way to secure a flat in the area. But first, you need to own a flat in Tanglin Halt. Hence the rise in interest of resale flats in the area. In Q2, the median price of a three-room resale HDB flat in Queenstown was $357,000.

Though most of the existing units in Tanglin Halt are two- and three-room flats, the replacement flats which will be provided by HDB will be four- and five-room ones. Although the authorities have placed a one-month freeze period for resale applications to allow owners to consider their options, the restriction has since been lifted and applications can now be submitted till 31 Aug 2015.

There are long-time residents who do wish to still hold on to their flats as long as possible, for memory, familiarity and convenience sake. And after all, they will receive a prime unit when the time comes for the move.

HDB flat rentals stay low

The play between supply and demand never gets old. And the tug-and-push continues as rental demand for HDB flats remains lacklustre possibly for the rest of the year.

Immigration policies seem to be the main factor at play, keeping foreign workforce numbers low and thus affecting the demand for rental properties. According to the Singapore Real Estate Exchange (SRX) figures, the HDB rental index has fallen 2.3 per cent.

But is this the deepest pit of the slowdown or will it continue? Industry experts are predicting this as only the beginning of the rental drop. Sales prices of HDB resale flats have already begun on their downhill journey and though the drop is not drastic, it is rather significant for the year. Most property analysts are expecting a 4 – 7 per cent drop by the end of 2014.

Woodlands HDBNaturally, areas which are further away from transport nodes such as bus stops, main expressways or MRT stations are most affected. HDB flats near MRT stations will continue to hold their prices, whether in sales or rent. Some of the flats fetching the highest rent are in the Central, Bukit Merah and Queenstown estates. Prices range between $2250 for a 3-room flat to $2, 900 for a 4-room flat.

Although Woodlands seems far to many, the area is favoured by many tenants, perhaps due to its proximity to the causeway. Rental prices of flats in the area is lower, between $1,700 to $2, 000 for a 3- or 4-room HDB flat, but demand is higher and the ease of finding will benefit flat owners in the area.

Another reason for the falling rental rates might be the increase in the number of properties available for rent across the board. With some private suburban condominiums reaching completion and some in popular HDB estates, the competition will definitely heat up. 2014 seems pretty set its way for now, but there is always 2015 to look forward to.

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.