Raised Income ceilings for HDB and EC flats

In the months ahead, the HDB market may see some significant changes.

In his National Day Rally speech on Sunday, Prime Minister Lee Hsien Loong announced a raise in income ceilings for new HDB flats as well as ECs (executive condominiums). The income ceiling for HDB flats could be raised from $10,000 to $12,000 and for executive condominiums, from $12,000 to $14,000. Just four years a, the income ceiling for ECs was raised to $12,000 but apparently income levels have risen since then. The government are also making it easier for lower-income households to purchase 2-room flats. The Special Housing Grant (SHG) will be raised from $20,000 to $40,000, giving them the financial support they truly need.

Forestville Executive Condominium.

Forestville Executive Condominium.

And to promote stronger familial ties plus cater to the growing group of young families who prefer to live near their parents, a new Proximity Housing Grant will help buyers who wish to live near their parents or married children secure their new flat.

This could be good news for buyers and home-seekers, as more applicants may then find themselves eligible for a new BTO flat or EC. But will there be more applicants now vying for available units. And how will this move  possibly affect the resale HDB flat market?

 

Reduced BTO flats = Increased resale flat demand?

The number was 16,900 and now it is 15,000. The Housing Board has revised the number of new BTO (build-to-order) flats to be offered this year as the resale HDB flat market has shown signs of stabilising.

In the previous year or two, the increased supply of BTO flats has meant that more who qualify to apply for a flat directly from HDB have been able to secure one fairly successfully, which has reduced the demand for resale flats. Recent launches have even been undersubscribed for some segments – three-room flats in Sembawang and four-room flats in Bukit Batok. Second-timers have also been more successful in securing units in this year’s BTO launches and the pool of available units in the Sale of Balance Flats (SBF) has been growing.

BIdadari HDB

Photo credit: HDB

Prices of resale HDB flats have fallen 7.4 to 12.4 per cent since its peak in 2013. But the last quarter has indicated once more, a rising demand  for resale HDB flats, partly due to the lowered prices and the sense of the market bottoming out.

The next HDB BTO sales launch will be later this year in September, with 4,860 flats up for offer in Bidadari and Punggol Northshore, both of which are increasingly popular spots for young couples and families.

 

More go for Clementi HDB flats

HDB launches in mature estates have always been popular with applicants. And in their May launch this year, applicants are heading straight for the new BTO flats in Clementi. The application rate for 5-room flats in this HDB estate was at 13.1 per unit. 2,047 buyers vied for just 156 units. All this despite the Clementi flats being the priciest ones of the entire launch. 5-room units had price tags starting from $566,000. Property analysts have however expected such fervent response as the new flats were situated close to the MRT station and other amenities.

ClementiCrestHDB

Photo credit: HDB

But waterfront units at Punggol Northshore received quite a bit of attention as well, as the new town sees more development and potential growth. These flats featured the latest products by HDB – smart-technology HDB homes. Although not quite reaching the 13.1 rate for the Clementi flats, the 2.8 application rate for the Punggol flats (double the 1.3 rate for the last Punggol flat launch) already showed an marked increase in interest for flats in this area.

Overall, the recent launch had an application rate of 3.7 per cent, making it the most oversubscribed launch since July last year. Since HDB has reduced the number of launches this year, could future launches have similar reactions? How will that change the demand for resale HDB flats in the areas or estates surrounding the launch?

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.

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.

Housing supply to slow down in 2015

The authorities have announced that public housing supply and land sales will slow down come 2015 as the market has showed signs of cooling and stablising after the many rounds of property cooling measures rolled out over the past year or two.

West Terra HDB Bukit BatokPhoto Credit: HDB

The Minister for National Development, Mr Khaw Boon Wan, has commented in a blog post that the supply of new HDB flats will slow by 25 per cent next year. There will only be 4 launches next year, compared to the usual 6 per year. Each launch usually puts out up to 4,000 new Build-to-order (BTO) flats. The rate of successful BTO flat applications has been on the rise as reflected in the few recent launches. More married couples achieve success in getting their new flats, and the authorities have been allowances for couples either opting to apply for a flat with their parents, or for one near their parents. In addition, parents who opt to apply for a flat in a non-mature estate to be near their married children, will also receive priority.

The slight shift in policies may ensure that families remain close-knit and are able to receive help when needed. It may also help with a shift in aging mature estates and introduce a more age-balanced population per HDB estate. Mr Khaw Boon Wan also hopes that the move will help newlyweds plan for a family more efficiently and in turn increase Singapore’s population with a higher birth rate.

In the private property sector, the number of land plots being sold for executive condominiums and private apartments has already been reduced this year, though the industry might see a further reduction come 2015. But will this mean a decline in the building, construction and property industries? Or has the previous land sales and launches been sufficient to keep the industry going for the next few years? Which part of the cycle is the property sector in at the moment and are we set for a boom or lull in the next year?

What does Q1’s slow private property growth rate indicate?

A cooling real estate market? Perhaps. But not by much. Of course, we do have to give the cooling measures time to work. But if we go by the response from the previous rounds, it may not do much. Although the pace has weakened somewhat, a 0.5 per cent growth as compared to the 1.8 per cent jump in the last quarter, private home prices still reached a record high.

QBay Residences

QBay Residences

Private non-landed suburban homes alone showed a 1.7 per cent rise, still a rise, but well lesser than the previous quarter’s 3.8 per cent. Property analysts are expecting further effect from the cooling measures to kick in this year, maintaining home prices at the current levels.

In the HDB flat market, resale flats may expect a fall in demand as singles will be allowed to purchase new Build-to-Order (BTO) flats directly from the Housing Board come July. The bumper crop of new flats being rolled out within the first 3 months of 2013 alone has also taken away the need to purchase from within the resale market. The quota plus the lowering of home loans to 30 per cent of a borrower’s gross monthly pay, 40 per cent if receiving a HDB home loan, has also taken some wind out of the sails. PropNex cheif executive Mohamed Ismail is however still expecting a rise in resale HDB flat prices, of between 4 to 5 per cent.

The Singapore Real Estate Exchange has reported a fall of HDB resale transactions from 4, 635 in Q4 of 2012 to 3, 028 in Q1 of 2013. The median COV prices have dropped by very slightly, from $34, 000 to $33, 000. This may not be quite the comfort buyers are hoping for, especially since resale prices have risen to an average of $457,000.

This could be the time to suss out potential long-term investments in the private property market as many developers are dangling carrots in the form of discounts, rebates and other incentives in order to secure more sales. Recent launches at D’Nest and Urban Vista have also boosted sales. The authorities seem more determined this year than ever to help tame the roaring property lion, but they will need to give property curbs some time to take effect before deciding their next move.

Families benefit from new priority scheme

Before, it’s not often unheard of young couples having to wait years before getting the keys to their new flat. Some even have to wait to get a HDB flat, and then wait some more to live in their selected flat. But now, with a new priority scheme aimed at helping young families with children, the waiting time may be considerably shortened.

HDB's January BTO sales launch. Photo of Keat Hong Colours BTO Flats by HDB.

HDB’s January BTO sales launch. Photo of Keat Hong Colours BTO Flats by HDB.

And more are taking advantage of this, it seems. Up to the full 30 per cent of HDB flats allocated for them in January’s Biuld-to-Order (BTO) sales launch were taken up by applicants who qualify. This means, out of all the young families with children who applied for a flat, almost all will receive one. Named the Parenthood Priority Scheme, it was introduced early this year as part of the government’s push for marriage and parenthood. The scheme stipulates that up to 30 per cent of each HDB BTO launch will be set aside for married couples with children under the age of 16. It is aimed at helping couples set up families more quickly.

Success, however, is limited to the non-mature HDB estates such as Choa Chu Kang, Hougang and Yishun. Mature estates of Ang Mo Kio, Kallang/Whampoa and Tampines saw married applicants with kids applying for almost 80 per cent of the number of flats available. Understandably, mature estates are more popular with HDB flat applicants, regardless of category. These areas often already have established schools, amenities and means of transport, plus applicants may be applying for such areas in order to live nearer to their parents.

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

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

Many applicants are hoping that this new scheme will increase their chances of successfully balloting for a flat, since quite a number have been waiting endlessly for one. For the rest of the applicants, it may be good news that HDB is planning to launch a ‘balance flats’ sale sometime later in the year and it may the lucky year of the snake for some.