Resale HDB flats – Sales go up as prices do down?

2014 saw a record low number of HDB resale flats exchanging hands. It could be due to the effects of the property cooling measures, in particular the TDSR (Total Debt Servicing Ratio) framework set by the Monetary Authority of Singapore,  just starting to kick in. Buyers were more wary and more careful in weighing their options while sellers were still unwilling to lower prices. The tussle was just beginning.

SeaHorizonECBut this year, it seems one side is starting to give, slightly; especially for those who need to sell their current flat within the stipulated time of collecting the keys to their new flat, or face forfeiting their deposit. Prices of resale HDB flats have dropped 0.8 per cent in March this year, and the number of transactions increase from 1,148 to 1,349., As the number of new BTO (Build-to-order) HDB flats which will be launched this year decrease, buyers may also begin turning to resale flats to fulfil their needs. Prices of four- and five-room flats fell the most at 1.1 per cent and prices have been dropping since a year ago.

Property experts continued to stick to their forecast of a 5 to 6 per cent drop in resale flat prices this year, and hope for a higher sales volume than last year. It all depends on how the market fares from now till June, just before the traditional lull period of the Hungry Ghost Month.

Prices of rare HDB flats such as ECs (executive condominiums) remained high however, in fact showing a rise of 1 per cent last month.

New HDB Rental quotas

The noose around the HDB market tightens a little more this year as further restrictions are put on it, this time around the rental sector. It will not be as easy to rent out your HDB flat anymore this year, especially if your potential tenant is a non-Singaporean citizen.

Every block of HDB flat can only have 11 per cent of its unit rented out, and only 8 per cent per HDB neighbourhood. The government says that the quotas are put in place to prevent the build-up of “foreigner enclaves” in HDB estates. Malaysians are the only exception to the rule as their close links to Singapore makes for easier and better integration into the Singaporean culture.

Woodlands HDBBefore panic sets in, this quota only applies to those renting out the entire flat. Those who are subletting only rooms are still subjected to existing rules. Thus far, only 1 per cent of HDB estates have reached the quotas, and the new regulation will not affect existing tenants until their rent period expires. Towns where quotas have been reached are Clementi, Jurong West, Queenstown and Sengkang.

Sales and rental prices may be affected in high-commercial-density areas such as Changi, Buona Vista and Woodlands. How will this affect the buyers and sellers in the resale HDB market? Will this mean an even deeper diminishing pocket of sellers and will it affect those who are depending on a rental income to keep a roof over their heads? Will this sieve out those who have been counting on making some profit through rental?

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.

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?

Single but not alone

As more help come in the shape of new rulings and higher grants for low-income singles hoping to buy a HDB flat. Starting from this month, singles are allowed to purchase new HDB flats, albeit only 2-room ones. The latest BTO launch includes some of these allocated in Yishun, Sengkang and Bukit Merah. Up to a third of the 519 two-room HDB flats have been put aside for singles.

Orchid Spring Yishun BTO HDBIt may be a bit of squeeze as these 2-room units are usually sized around 35 to 45 sq m but it is certainly an option singles are thankful for having. In the previous March launch of Orchid Springs @ Yishun, there are 108 such units available. And it looks like they are certainly a welcome relief as each unit saw an average of 5 applicants. Industry analysts are expecting more singles to change track and switch from buying resale HDB flats to purchasing these new ones as some of the new flats available are already being built and will be ready for occupancy very soon.

Angsana Breeze in Yishun. Part of July 2013's HDB BTO flats launch.

Angsana Breeze in Yishun. Part of July 2013′s HDB BTO flats launch.

And on top of that, low-income singles earning a monthly income of $1, 125 or less who are looking to purchase their first home can receive up to $30, 000 in housing grants if they apply for a HDB flat on their own. And if it is a joint application with two or more singles, the grant can be doubled to $60, 000. Which may ultimately mean the cost of buying a 2-room HDB flat could be as low as $16, 000. And for singles earning $2, 500 or less a month,  there is up to $20, 000 of grants available should you be looking for a resale flat on the open market. For those earning $5, 000 or less per month, housing grants are at $15,000.

These new changes are seen as positive moves buy the government to push for home ownership and by the response from singles applying for this first round of 2-room flats, it certainly seems like it has hit home. On the other hand, how will this impact the resale HDB flat market?

Married couples opt for HDB Parenthood Priority Scheme

It may or may not increase the likelihood of young Singaporean couples starting a family sooner, but more married couples are purchasing new HDB flats under the Parenthood Priority Scheme (PPS).

In the March sales launch alone, 32 per cent of Build-To-Order (BTO) flats were taken up by applicants under the PPS scheme. There is almost 100% possibility of all PPS applicants getting a flat. 3, 898 flats were launched in March in non-mature estates such as Sengkang, Punggol and Bukit Batok. A total of 12,000 applicants applied for BTO flats in the latest launch.

Compassvale Cape Mar2013

HDB’s next launch will be later this month, in Choa Chu Kang, Hougang, Jurong West, Sembawang and Woodlands. WIth 4, 850 new flats plus 3,000 balance flats from previous launches planned, response from PPS applicants may be even more than March’s 32 per cent. Other schemes which the HDB provides include the:

  • Multi-Generation Priority Scheme (MGPS)
  • Married Child Priority Scheme (MCPS)
  • Third-Child Priority (TCP) Scheme
  • Tenants Priority Scheme (TPS)
  • Ageing-in-Place Priority Scheme (APPS)
  • Studio Apartment Priority Scheme (SAPS)

It should be noted that for the hotly debated Executive Condominiums (EC), the priority schemes do not apply. And for previous Design Build and Sell developments, developers are required to give priority to buyers applying under the Married Child Priority (MCP) Scheme and the Third-Child Priority (TCP) Scheme.

Topiary Executive Condominium in Fernvale.

Topiary Executive Condominium in Fernvale.

Under the MCPS, applicants who are a first-time married couple and who have at least one child below the age of 16 qualify for up to 30% of BTO and 50% of SBF (sale of balance) flats in each launch. This scheme began in January 2013 and many have since successfully secured a HDB Flat by applying under this scheme. Whether this will help population growth and fertility rate remains to be seen, but at least it has helped Singaporean couples secure a home more quickly and without the pain of waiting endlessly.

Previously married couples had joined engaged couples applying under the Fiancee scheme. However unmarried couples made up close to 50% of the applicants under this scheme, which lessened the chances of those who are already married or already have a child securing a flat.

Singles will be allowed to buy new HDB Flats by July

This rang clear in the National Development Khaw Boon Wan’s message last Friday. And many are already cheering.

Currently singles above the age of 35 are allowed to buy HDB flats, but only from the resale market.

Currently singles above the age of 35 are allowed to buy HDB flats, but only from the resale market.

There are caveats however.

  • The age limit for singles buying flats has not changed, resale or new, you have to be 35 years of age before you can buy a public housing unit.
  • Singles can only buy 2-room flats . These flats are either 375 or 485 sq ft in size. This is just slightly smaller than some studio apartments or shoebox apartments in private condominiums.
  • There is an income cap at $5000.
2-room Bukit Batok HDB flat for sale.

2-room Bukit Batok HDB flat for sale.

A new 2-room HDB flat in Punggol went for around $100,000 last year, and that was before available grants kicked in. Currently singles can apply for a $15, 000 HDB grant if they earn $5000 or less. Mr Khaw has said that they recognise that those earning under $5000 a month will face difficulties owning a home in Singapore.

Part of the reason behind pushing out this new ruling by July this year is that the increased supply of new HDB flats have cleared “a backlog of applications from married couples seeking a Housing Board home for the first time”.

Is this new move a response to Prime MInister Lee Hsien Loong’s National Day Rally speech last year, where he acknowledged that singles have housing needs too?  Are these restrictions fair and what are the possible loopholes? Will this cause a drop of resale HDB flat prices and how will that change the landscape of this market?

Yishun climbing in ranks

As one of the sleepier HDB estates with perhaps an older, lower-income resident profile, Yishun could be seeing a turn of tide this year. Although as large, if not more, in size than neighbouring Ang Mo Kio and Woodlands, Yishun has been relatively quiet in terms of property investments and new property launches.

Miltonia Residences in Sembawang.

Miltonia Residences in Sembawang.

But a possible revival could be in its books. With recent launches such as Miltonia Residences and Skies Miltonia, and also a rise in industrial activity at A’Posh Bizhub, Northpoint Bizhub and North Spring Bizhub, there has been a rise in the number of residential transactions in the area. Over the past year, 1, 189 properties have been sold.

In January this year, 26 home sales were recorded, as compared to the 7 in January 2012. But with the lack of other new launches, home prices here could have lost some shine. So far, the average price of $874psf have pretty much stayed the same from a year ago. The only high which was recorded was in October last year when Skies Miltonia was launched.


With one of the lowest percentage of young residents below 15 years of age, and 11 per cent earning below $1, 999 per month, perhaps an estate makeover could be in the pipeline. Keeping in mind that a new highway, the Eastern Dispersal Link, will shorten travelling time between the Causeway and the Iskandar development region in Malaysia, a new rush of temporary (and possibly permanent) residents might be headed Yishun’s way. Will this increase rental yields in that area?

According to Savills‘ head of research Alan Cheong, increasing the number and rate of new properties, both public and private, in Yishun may help to bring new, and younger, blood into the population. Will this be one of the next mature HDB estates to have new BTO flats?