Changes in the public housing landscape?

The ratio of home owners living in private homes versus HDB flats have been rising. The proportion of HDB flats in Singapore’s total housing stock is also smaller now compared to 10 years ago despite more public housing being made available with the government’s moves in the last few years to ramp up supply of new flats.

HDB flats STB photoPhoto credit: Singapore Tourism Board

Last year, with just slightly more than 1 million HDB units, the percentage of public housing stock stood at 73 per cent. In 2006, with 880,000 units, the proportion was 78 per cent. Respectively, the number of private condominium units and landed homes was 372,0000 and 243,000 with the percentage growing from 22 to 27 per cent within a decade.

Does this signify Singapore’s rising living standards and that more are now able to afford private housing? How has the functionality and affordability of public housing changed over the years? Recent government reports indicates that the percentage of BTO flat buyers who defer on their purchase after they have been invited to collect their keys is now less than 2 per cent. This could mean that more are now taking better stock of their finances and are able to make sustained payments for their new flats despite rising prices. The resale market could also be stabilising as more are finding it easier to sell off their existing flats within a reasonable grace period.

Bidadari HDB flats 2Photo credit: Housing Board (HDB)

National Development Minister Lawrence Wong has however reminded buyers to take into account market fluctuations when computing the financing of their new home with proceeds from sales of their existing flat. In provisional cases where buyers are unable to find buyers for or let go of their existing HDB Flat, the government does offer time extensions and exercise some flexibility for example waiving the required forfeiture payment.

1 in 5 first-time HDB Flat buyers opt for resale

CLementiHDBIt has become easier for first-time HDB flat buyers to secure a new flat directly from the Housing Board (HDB) but some are still opting for one in the resale market. 95 per cent of new Build-to-order (BTO) units are now reserved for first-time buyers. But yet figures have shown that 1 in 5 first-time HDB flat buyers are still choosing to buy a unit from the resale flat market instead of applying for a new one.

The decline in resale flat prices, the growing pool of available resale flats on sale in mature estates and the fact that more young buyers are willing to pay dearly for older flats to get the space and location they desire could all be reasons for the high numbers of first-time buyers choosing to buy resale.  Younger families prefer homes in better locations, perhaps also to be closer to their extended families, and they now have more available stock to choose from. For buyers buying a flat near their parents, they can also receive a $20,000 housing grant.

ClementiHDBflat3,441 Singaporean families purchased a resale flat with the aid of housing grants last year – that is almost 20 per cent of the flat purchases made by first-time buyers. The remaining 80 per cent applied for 14,273 subsidised units directly from HDB. Young couples who are eager to start a family may also choose to purchase from the resale market in order to skip the waiting period of 3 to 4 years which comes with the acquisition of a new BTO flat. The now-enhanced CPF Housing Grants also mean first-time buyers can get up to to $50,000 in subsidies.

Will this then mean that resale flat sellers can price up as demand does not seem to have waned? Not necessarily so, as the option of new flats are very much available to first-time buyers. There have however been recent transactions in popular areas where records were set for resale units – such as $1.04 million for a 118 sq m resale flat on the 39th floor of Clementi Towers.

Limits placed on tenancy of private homes

From today on, private homes can no longer be tenanted by more than 6 unrelated persons. This is 2 lesser than previous cap of 8 persons.

Enforced by the Urban Redevelopment Authority (URA), the new ruling kicks in today but existing tenancy agreements of 7 or 8 persons will be allowed to carry on until May 15, 2019 regardless of the tenancy contract’s expiration date.

TownervilleThis change was made to keep the integrity and character of the local community and to ensure that residential premises integrate with the neighbourhood. The move will also better engage the services of student hostels and company dormitories. There are differing views to this change. Property agents, some landlords and even tenants may welcome this shift towards quieter and less disruptive living environments. Others who are relying on rental income to prop up their finances may have opposing views. The loss of 2 tenants could very well surmount to $1800 to $2600 in potential monthly rents.

This shift to tenancy regulations will also affect home-sharing market such as Airbnb. The URA has been considering the creation of new leasing category for short-term rentals such as those publicised on home-sharing sites. And for those wondering if a huge bungalow and a small private studio may have different restrictions? The answer is no. URA has stated that there is no “stratified occupancy cap control based on unit sizes”.

Aura83For HDB flats which are sublet, the number of sub-tenants allowed remain unchanged at 6 and 9 for 3-room and 4-room or bigger units respectively. Property analysts are however expecting this new tenancy rules to soon apply for the HDB market.

 

Resale HDB sales volume down last quarter

After a period of relative stability in the resale HDB flat market, numbers have dipped once more last month with 1,834 transactions recorded in April compared to 1,910 in March.

TheTerraceECPunggolSales volume for resale HDB flats fell 4 per cent in April, and was also 0.9 per cent lower than April 2016. Prices also fell 0.3 per cent from March with only that of 5-room flats increasing by 0.2 per cent. Resale prices for 3-, 4-room and executive flats fell 0.2, 0.7 and 0.9 per cent respectively.

While resale units in mature estates continue to be in demand, prices of those in mature estates have fallen 0.9 per cent, as compared to the 0.2 per cent of units in non-mature estates. Though this may not necessarily signify a bottoming-out of the property cycle, property analysts are hopeful that sales will pick up in the 3rd and 4th quarter to hit the 20,000 target by year-end.

Since the property peak of 2013, resale flat prices have fallen 11.4 per cent. Q1’s fall of 0.5 per cent was a little steeper than the relatively minute fluctuations of 0 to 0.1 per cent for the last year, but art of the fall in sales volume in Q1 could be due to the Chinese New Year festivities and the market continues to be plug on in a state of stability.

 

What do you do with an ageing HDB Flat?

If you live in a HDB flat with less than 60 years left on its lease, or are looking at one which you really fancy, what can you make of its limited lifespan?

HDB flat Jurong WestHDB flats have life spans of 99 years and in mature estates, many of these flats were built in the 1970s and 1980s, which means they are now about 30 to 40 years old at the minimum. Recently, the National Development Minister Lawrence Wong has raised concerns about the high prices paid for HDB flats with very few years left in the leases. The value of HDB flats decreases towards a zero mark on its expiry and will then eventually have to be returned to the Housing Board (HDB).

The issue of ageing HDB flats has also raised concerns for the elderly as they are unable to then monetise their HDB flats. The government has however offered up solutions to aid senior citizens in preparing for retirement. Three schemes are in place to do just that:

1) Silver Housing Bonus Scheme

2) Lease Buyback Scheme

3) Subletting the HDB flat

HDBFlatRentalThe first – the Silver Housing Bonus Scheme – allows the elderly to sell their flat, downsize and receive cash bonuses of up to $20,00. Should they chose to sell their flat, they can also receive up to $100,000 upfront in cash and $500 monthly retirement income.

The Lease Buyback Scheme allows owners of 4-room or smaller flats to sell the remaining years of lease back to the HDB for a cash bonus and regular retirement income. Though the cash amount is lesser than that of the Silver Housing Bonus Scheme, the scheme is more popular with 952 households taking up the scheme in within 10 months in 2016 and the flat owners can remain living in a familiar living environment.

The last option, while not offered directly by the government, is legal and permissible, giving the elderly an option of receiving passive income while still living in their own flat. As more flats age, it will become harder to sell older units, though some buyers are still willing to invest in an unit in a good location despite its shorter life span. It does ultimately boil down to the age-old rule of supply and demand.

Paying more for older resale flats – Aye or nay?

National Housing Minister Lawrence Wong has recently raised concerns about transactions of resale flats with less than 60-years on their lease for above-market values.

The increasing number of such transactions in the resale HDB flat market seem to indicate that buyers are putting aside factors such as age of the flat (HDB flats have a 99-year lease) and favouring others such as location, size of the flat and even the possibility of the blocks qualifying for the Selective En Bloc Redevelopment Scheme (Sers). Under Sers, certain blocks of flats built on or around sites where land has yet to be fully utilised or developed are acquired by the government and demolished. The residents are granted a fixed sum of $15,000 for singles and $30,000 for families in the form of a Sers grant and also guaranteed a replacement flat in new blocks with a full 99-year lease.

KallangWhampoaHDBflat

But the authorities are warning against paying too much for flats which are older than 30 years, or with less than 60 years left on the lease, especially for younger couples.  Many buyers may be under the impression that the value of the bigger resale flats, some in locations which are becoming more developed and hip, will increase as time goes by. Some have purchased rare terraced units such as those in Whampoa or Queenstown and are confident of flipping them within the next half a decade for more. There will be those who will are counting on location to be the prime draw when they finally sell. Older resale flats are usually in mature estates with well-established amenities, schools and transport available immediately. Some buyers could also be in urgent need of a flat and are unable to wait for the ballot and construction wait involved with new Build-to-order (BTO) flats.

Last HUDC privatised last month – Braddell View

HUDC – most who grew up after the 80s will have no idea what these 4 letters mean in relation to the local housing market. In their heyday, the HUDC or Housing and Urban Devleopment Company scheme consisted of selected flats were built  larger, better and fancier than their other public housing counterparts. They were a little like the executive condominiums (ECs) of Design, Build and Sell (DBSS) flats of their day, meant to bridge the gap between the public and private property markets.

BraddellViewMost of the HUDC projects have been privatised over the years, and the era officially drew to a close as the last of the 18 HUDC estate reached privatisation last month. Braddell View, the largest of all the HUDC estates consisted of 918 flats and 2 shops and will join the other 7,731 units which have been privatised since its implementation almost 40 years ago. The scheme ended in 1987 when demand for bigger public housing options diminished due to the availability of private housing which fulfilled the wants and needs of the ‘sandwiched’ classes.

Ironically, many now think that the government could do very well to re-establish a scheme in the same vein as the HUDCs to provide for families hoping to upgrade within the public housing sector, especially as the newer flats are often lacking in terms of space. The privatisation of Braddell View has taken almost 18 years due to the staggered timing of leases of land on which the property stands. What is left for these HUDC estates after privatisation? The rather lucrative possibility of a collective sale, quite naturally.

 

Winds of change in local property market

A decade or so ago, owning a second or third property might be the fastest way to secure your retirement funds or to even accumulate a tidy little kitty. Investment properties were considered a surefire way of earning additional income, but in the climate of today, property owners and investors have much more factors to consider and competition to battle against.

SunshinePlazaResidencesWith the rental market weakening, property agents are finding that it takes twice as long and also many more viewings before a property is successfully tenanted. And even then, for much less than before. Some property owners have had to reduce rents by almost half. Leaving the units empty are simply not an option for some investors as the rents go towards the mortgage or mortgages of their properties. It is after all better to have less help than none at all.

SerangoonHDBflatFor new investors looking to enter the market, the environment is a lot tougher than before. Considerations such as whether there is a large pool of HDB flats available for rental nearby, the long-term potential of the property, competition from other new launches or even within the same property, whether the local and global economy will affect businesses and commercial hubs nearby thus reducing the pool of foreign tenants, and so forth.

Before the market makes a complete recovery, a possibly lengthy period of stabilisation will ensue, despite the governments having made some allowances in the are of the property cooling curbs.