Evaluation of the HDB Resale Valuation

Recent changes in the valuation process for resale HDB flats have drawn some feedback from the public. Many are wary of how this mix-up will cause some hiccups in the buy-sell procedure and how it may also affect the selling prices.

Photo by HDB.

Photo by HDB. How does the recent change in the HDB resale process affect the seller and buyer?

Sellers will no longer be the ones to apply for valuation of their flats. They now need to come to an agreement on a selling price with the buyer before the buyer applies for the valuation. This may favour the buyer more than the seller as COV prices have been the main bugbear in the search and purchase of a suitable resale HDB unit, but without prior knowledge of the price of a unit based on the age, location and size of the unit, buyers may also be very much left to glean information from rumours in the wind or self-research.

HDB has however tried to bring some equilibrium to this confusion by publishing resale transaction figures daily instead of fortnightly.

What HDB hopes to achieve with this procedure renewal is:

  • Long-term stability of public housing prices
  • Less dependency of sales on COV (cash-over-valuation) prices
  • Making the HDB resale market more transparent

Will this move help them achieve all that? Or will market forces turn this around on its head and steer it in the other direction?

How much is that DBSS resale flat in the window?

$700,000. This is how much one of the first DBSS units to enter the resale market recently cost.

And this could very well set the trend for all the following DBSS resale units which enter the market. The Design, Build and Sell Scheme (DBSS) has been discontinued since 2011 when the public questioned the prices at which developers were selling the public housing units at. Centrale 8 at Tampines went for $880,000 in 2011, though developers lowered it to t$778, 000 thereafter.

The Premiere at Tampines

The Premiere at Tampines

But since units at the 2006-launched The Premiere at Tampines have gone on the resale market since most of its occupants have passed the 5-year minimum occupation period (MOP), all eyes are on how much these originally premium units will go for considering the current market situation.

Although lower than the highest asking price of $800,000 for units in Tampines, the average selling price is still about double of its original. A 5-room flat at The Preimiere @ Tampines originally cost $308,000 to $450,000. Recent sales figures showed a 2 units going for $699, 888 and $671,000. Comparing its age and size with other HDB flats nearby, they are considerably pricier. Most of the other HDB flats in this mature estate may however be larger, almost 109 sq m larger, but with less than 70 years left on the lease.

Centrale 8 in Tampines under the DBSS scheme. Image by Sim Lian Group Limited.

Centrale 8 in Tampines under the DBSS scheme. Image by Sim Lian Group Limited.

Should these young HDB flats cost more than its counterparts and will buyers buy into its premium private developer fittings qualifying for its higher prices even as resale units?

Change is in the wind for resale HDB market

And buyers too. More for buyers perhaps, as new rules regarding the cash-over-valuation (COV) for HDB resale flats kicked in at 5pm yesterday:

  • Sellers will no longer be the ones getting a valuation of their flats from HDB. Buyers instead are responsible for that part of the procedure.
  • HDB flat valuations can only be secured after the seller and buyer have agreed on a price. Previously, the seller could obtain a flat valuation prior to seller and then offer the valued price to the buyer, and on top of that demand a COV price.
  • The Option-to-purchase (OTP) period will now be 21 days instead of the previous 14.
Photo by ThinkStock.

Photo by ThinkStock.

Most of these new rulings were to help buyers obtain a home loan, especially since the loan limits have decreased. According to the National Development Minister, Mr Khaw Boon Wan, this move will also help “restore the original intention of valuation, which is to help buyers get a housing loan”.

The government is keen to make the HDB resale market less dependent on COV prices. Recent HDB sales have seen the COV prices drop to almost zero in many cases and some even selling below valuation. Just last year, median COV prices have sky-rocketed to $38,000 with some even garnering six-figures.

HDB will also now be publishing HDB transaction figures on a daily basis instead of fortnightly. These recent moves may be the push towards transparency the public housing market needs.

Real estate market fluctuations hard to predict

It might be a matter of long and in-depth research. Or perhaps a intuitive touch to reading the markets. Maybe it’s a matter of luck. Whichever it is you possess, perhaps even a combination of all three, the property market has always been a delicate and somewhat temperamental creature to handle. As we reach the end of the first quarter of 2014, many may be wondering if this year of the horse may gallop into the horizon or merely trot on the spot. The three factors creating the most effect on the current real estate market are:

  • Property curbs
  • Weak demand
  • Oversupply of homes
Property-related rules may be updated often, thus it would be helpful to keep track of new or amended rulings.

Where are home prices headed?

For buyers looking for a place to live, it might be a good time to jump in. Those waiting for a market crash to scoop up the best deals may be waiting in vain as that is rather unlikely. Singapore’s growing population will make for a constant demand for housing, and since home buyers usually have a fixed idea of which areas they would rather live in, other factors such as location, proximity to transport and schools, may still determine the price they pay.

Property upgraders may find themselves in a good spot as well. As the private property market becomes increasingly competitive, the price difference between their current and desired property may be diminishing, thus in turn save them a rather substantial amount.

Property investors may be those finding themselves most in a bind as mortgage limitations and rising interest rates create boundaries which may hinder their progress. Analysts advice against hasty decisions as properties may not be the easiest to manage within an investment portfolio. They suggest that investors look at all possible angles when considering a property, such as the number of bathrooms, size and shape of the unit, hidden spaces which may not suit the taste of most buyers etc. All-in-all, investors need to plan for future interest rate hikes, the possible lack of tenancy, financial holding power and governmental policy changes.

Shadows cast on property market

New properties are revving up their engines once more. As the market prepares themselves for these launches, what could the consumer expect?

Resale private properties situated near the sites of new properties to be launched this year may be slightly affected by the prices set by these new kids on the block. And as resale HDB flat prices dip, HDB upgraders may also not have as much as before to spend.   As developers find it harder to attract buyers since some have since redrawn from the investment pool as their finances are restricted by loan limits and mortgage curbs, prices of these new properties may be lower than expected. Properties nearby may then be forced to do the same with their resale units.

Tanglin ViewIn areas with potential for redevelopment and growth, such as Alexandra and Tanglin, competition may be fiercer. For example at Tanglin View condominium, the going rate used to be $1,600 psf a year ago, but now the average selling price stands at $1,400 psf. Similarly for Ascentia Sky apartments, prices have dropped from $1,900 psf to the current $1,500 psf.

But there are still profits to be made for private property sellers. Even though prices may not be as high as a couple of years ago, properties which were purchased 10 to 20 years ago may still find suitable buyers. Property prices today are definitely still much higher than a decade ago. Those who were hoping to rake in a quick profit with properties bought less than five years ago may find themselves having to hold on to their properties for slightly longer to wait out this year’s lull.

For the serious home buyer, it could be the prime time to buy.

iProperty launches new Room-for-rent E-service

Home rental has always been a big thing in Singapore. As in most other busy, cosmopolitan cities.

Some folks have extra space to spare, some are hoping to rake in their investments, others need a place to stay. Just a little cosy corner to call your own. If you’re not looking to rent a whole house, condo apartment or HDB flat, but only a room, iProperty now offers an efficient way of searching room rental listings throughout Singapore in just a few easy clicks.

iProperty room rentalRegistration is free and 4 easy steps later you’re able to post your rental ad. Powered by iProperty, the rental portal resides at sg-house.com. Attract as many as 52,000 views on your post and find a suitable tenant quickly and at the comfort of your desk. It’s an easy way for landlords to reach potential tenants and vice versa.

Short-term accommodation options are also available. Great for companies hunting down term rentals for their overseas employees. Filter down your search through keywords and find what you need pronto.

Besides this new feature, iProperty’s recently revamped website also has organised links and a site chock full of other property related resources such as a search function for properties near MRT stations or schools, directory of condominiums in Singapore and property trends.

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?

More going for BTO flats

Or so the numbers show. January marked the first launch of HDB’s new BTO flats for 2014, each new flat were oversubscribed by 1.6 times for first-timers and 3.5 times by second-timers. The location of these new launches were the main draw – two projects were situated in Punggol and many young couples and families were excited about the new waterfront living in this new town.

Matilda PunggolPhoto source: URA

Development and expansion in Punggol have been rapid, especially since it has been earmarked as the Punggol 21 township development plans under URA’s Draft Masterplan 2013. It promises to deliver a waterfront lifestyle living deep inland when previously only the outskirts, mainly in the East, of Singapore had the privilege of these sort of housing options. Although it may take some years yet before it is fully developed, the next decade may shift the focus into this area and as more families bring up their children there, no doubt popularity of its properties will also increase. And buying early may be the wisest choice yet. Private properties in the area include Ecopolitan, Watertown and Rivertrees Residences and executive condominiums such as Waterwoods, Prive and A Treasure Trove. It will be interesting to see which other new launches may move into the area this year.

Rivertrees condoAnd since HDB’s policy change in July last year, singles are now able to purchase 2-room flats directly from HDB and the subscription rate is a high 27.7. But the government has committed to offering up to 5,000 of such flats this year, with 30 per cent reserved for singles. There may be even more left in the basket for singles as the number of families going for 2-room flats are on the decline. Will this mean a change in the demand for 3-room resale HDB flats?