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.

Interest in Executive Condominiums wane

Just awhile ago, the interest in executive condominiums (ECs) was red hot as pent up demand for these sought-after properties was released after a long hiatus. In areas such as Jurong, which had not seen a new EC launch for 17 years, the response was promising.

This interest has however diminished very quickly. In the latest EC launch, only 18 per cent of the units launched have been sold. Out of the 378 units in The Amore EC in Edgdale Plains, only 70 were sold at its launch last weekend. Prices averaged at $800 psf. A similar property nearby, The Terrace executive condominium, which was launched earlier last month, has only had approximately 20 per cent of its 747 units sold at a median of $812 psf.
TheAmoreEC_1Photo Credit: www.amore-ec.com

Bellewaters EC in Sengkang and Bellewoods EC in Woodlands fared similarly, with the only development bucking the trend being The Lake Life EC in Jurong West. Most of the units at The Lake Life sold within the weekend of its launch in November 2014. The sudden demise of interest in ECs came unexpectedly as even within last year alone, there was a good 9-month wait before any new EC development was launched and a rise in sales figures after a long wait is the norm.

Property analysts are putting this slowdown on the increase supply of BTO (Build-to-order) HDB flats, declining resale prices which have made resale HDB flats more affordable and the 30 per cent Mortgage Servicing Ratio (MSR) which was implemented in December 2013.

Moving ahead in 2015, 10 more new EC launches are expected and sales may be slow as future ECs will require a resale levy tax and competition heats up within the same location. As seen by recent numbers, areas with a higher concentration of ECs tend to fare more poorly in terms of sales volume.

HDB resale market – Prices down, Sales up

15, 914 resale HDB flats were sold last year, compared to 14, 220 in 2013. Though the numbers were up in the terms of transaction volume, prices dipped slightly. Prices of resale flats in non-matures estates such as Punggol and Sengkang fell 8.3 per cent while those in mature estates such as Queenstown and Bishan saw a 3.1 per cent decline.
Pinnacle@Duxton_2015The largest drop were in the four- and five-room flats sectors. Prices of three-room flats remained the same while a 1.8 per cent increase may have cheered up some executive flat sellers. Recent additions to the resale market, flats at The Pinnacle @ Duxton, did extremely well, with 2 units already sold at $900,000 and $918,000. Property analysts are expecting four- and five-room flats here to hit the $1 million mark soon. With it’s prime location and unique design, plus it is only five-years young, that may not be such an impossible task.

Overall, the projected decline this year for the HDB market will mirror that of last, at a single-digit fall of 5 to 8 percent. And perhaps buyers will be buoyed by this news and have a good run this year as well. Industry experts are expecting a stable transaction level in the first 2 months of 2015, followed by an increase in activity in March after the Chinese New Year break.

Buyers think property market cool-down is here to stay

Private property prices and sales have been cooling for the past few months, and the market sentiments are that the cool-down will continue into the next year. Almost 4 in 10 people think that property prices will continue to decline over the next 6 months, though young couples who are at the verge of moving into the private property market think that a rise in housing prices may still be possible.

SantoriniInstead of a drastic fall in property prices, what 2014 has seen is a stabilisation of prices. HDB flat prices started off the price-drop which began in the second half of 2013. The private property sector followed suit in the beginning of this year. The most hard-hitting cooling measure was the restrictive loan limit which meant it became harder to borrow money to purchase a property. Although this may have made private property prices fall slightly, prices of HDB flats have not fallen significantly enough and with it becoming harder to get a HDB or bank loan, buyers of resale flats may be priced out of the market.

Thus a valid question may be, is the price decline sufficient? Is the decline sector- specific and is owning a property in Singapore a feasible goal for most citizens? What else can the authorities do to ensure equal opportunities for all. As the country prepares itself for the next General Election, answers may come soon.

Lake Life EC in Jurong attract first-time buyers

Unlike its counterpart in Punggol, Lake Life EC in Jurong have been attracting mostly first-time applicants. Buyers at The Terrace executive condominium in Punggol were mainly HDB upgraders.

Lake Life ECEven the developer, Evia Real Estate, was surprised by the large numbers of younger Singaporeans. About half of the 534 buyers were first-time HDB unit buyers. Perhaps partly driven by the pent-up demand for ECs, especially in the Jurong district, as Lake Life is the first EC to be built there in 17 years; and also drawn by the promise of an estate rejuvenation with lakefront living and new amenities. Top that off with governmental subsidies for couples living near their parents, it is not surprising most of the buyers were already living in Jurong or the nearby HDB estates such as Bukit Panjang, Bukit Batok and Clementi.

This could signify a shift in buyers’ minds about the industrial and out-of-the-way Jurong of before. It has continuously added amenities and facilities to its midst, including libraries, schools, shopping malls and regional business headquarters.

Most of the buyers were below 40 years old and the average combined family income was $9,042. To qualify for a housing subsidy ranging between $5000 to $30,000 from HDB, the combined household income must not exceed $12,000. Perhaps this points to a new breed of home seekers and property buyers. Will private property developers eventually work to suit their needs and demands and close the gap between public and private property sectors?

EC peasy weekend breezy

If the crowds at the latest executive condominium (EC) launch were anything to go by, the property market may look a little cheerier. Despite many buyers being out of town and the upcoming busy holiday season, response to The Terrace EC in Punggol was heartening. 100 units out of the 747 were sold over the weekend alone. The Terrace launched on Sunday with prices starting at $710 psf for a three-bedder.

The TerraceMany of the buyers were young families and HDB upgraders as the options for mid to larger-sized units were available. The average unit size range from 1,001 sq ft for a three-bedroom unit to 1,711 sq ft for a penthouse unit. Other executive condominiums previously launched saw a slower weekend, but that could be due to the usual year-end lull and the fact that most units have already been selected and sold.

Location remains the main draw, though the EC sector is looking more positive than the private property sector. The other executive condominium developments which recently went on sale include The Lake Life, Bellewoods and Bellewaters. Joining The Terrace in Punggol will be the The Amore EC which is targeted to launch in January 2015. As competition heats up within the same district, buyers may have a wider range of options and prices may also adjust accordingly.

New private condos threaten Rental Market

As more new private condominiums in the suburbs attain their occupation-ready status, the number of apartments available for rental has increased significantly and fierce competition has brought rental prices down. Though concentrated mainly in the suburbs, where most of the new condominiums are situated, the decline has dragged the rental market down by 1.5 per cent.

FOresta Mount FaberAnd as most of these new condominiums are in close proximity to HDB flats, the HDB rental market has also been affected somewhat as tenants now realised they may be able to afford a private condo after all and instead choose this option over HDB flats. And as this pressure is exerted on the HDB market, some HDB flat owners may consider jumping over to the private property market and the HDB resale flat sector may see some shifting as a result of the spillover effect.

From January to September of this year, there were a total of 6,621 condominium units entering the market in the suburbs alone. This has pushed rental prices down 5.3 per cent and a 1.3 drop in the number of rental deals signed in September alone. However, a year-on-year comparison with 2013 showed an increase of 11.8 per cent in terms of the number of units leased. This could signify a shift of tenants leasing private properties as opposed to HDB flats as the price gap narrows.

Eight RiversuitesMoving forward, 2015 and 2016 may see a vacancy rate of 10 per cent and more if immigration policies remain the same and if rental prices become even more competitive with up to 20,000 new units reaching completion annually. Is this a sign that the cooling measures have worked? Or is it merely a sign that investing in residential property may have to take a different slant, to focus on long-term profits through property appreciation rather than on short-term rental profits? How does that then change the criteria for property selection?

New properties lower overall rent

Though the government has reduced land sales in the second half of the year, a fresh new crop of properties reaching their point of maturity in the next year may have some effect on the rental prices of private properties across the board. In 2013 alone, 16,000 new non-landed properties entered the market and 25,000 more are expected to flood the market by 2016.

Shore Residences on Amber Road

Shore Residences on Amber Road

Tenants will have more rental options ranging from units in brand-new condominium to those at older private apartments as a large supply of condominiums enter the market next year. And as most tenants in a new development receive keys to their units at the same time, they may face competition from one another as they put up their units for rent at the same time. Older neighbouring properties as well as HDB flats may also face the same competition as tenants opt for newer choices. Rental prices may waver and some landlords may find themselves having to lower the rent to secure a suitable tenant.

Landlords may find themselves competing for the same and somewhat decreasing tenant pool, especially with concurrent restrictions placed on the foreign workforce. Diminishing expatriate housing allowances may also mean tenants may be looking out of the city centre for rental options. And though most of the new properties are situated out of the central region, the sheer supply may overshadow the demand.

Take the Katong, Joo Chiat and Amber road district for example. In that small area, there is The Shore Residences, Silversea, The Meyerise amongst other older properties. And in the up-and-coming Punggol and Sengkang regions, there is a good mix of ECs and private condominiums such as A Treasure Trove, The Luxurie and the latest launch of Bellewaters. It could very well be the battle between the new and newer in time to come as many new homes are erected in already-new clusters of private homes.