Do upgraded HDB flats bring higher resale prices?

Given an older resale HDB flat in a prime location and a recently upgraded one in a less popular HDB estate, which would you choose?

HDB recently announced that they will be speeding up the Home Improvement Programme, the Neighbourhood Renewal Programme and the Selective Lift Replacement Programme. Some sellers and property agents are putting a higher price tag on flats which have be selected for such programmes. But with caveats.

HDB MUPPhoto credit: HDB

Only HDB flats whose owners have already paid for the upgrading may have an edge in the resale market. As the upgrading is usually only billed and paid for after the work is completed, some buyers may find themselves having to foot the bill for the flat or estate’s upgrading work if the seller has not already done so. Though it may seem like a significant difference, property agents are saying that it will not affect resale prices on the whole. The most it will do is slow down the price decline.

In fact, some buyers may prefer not to purchase flats which have yet been upgraded as it may bring inconveniences such as dust and noise for a significant period of time. Only flats which have been completely upgraded can command a higher selling price. But buyers who are thinking ahead may consider these older flats for the potential they hold once upgrading has been completed. With elderly-friendly facilities, newer amenities, perhaps even more room, the future could be more promising than you think.

More vacant EC units left in the market

Executive Condominiums (ECs) used to be the cream of the public housing crop. But now, one in eight EC units are left unoccupied in the market. What are the reasons behind this change?

Belysa Executive Condominium in Pasir Ris is not yet available on the resale market for foriegn purchase. But it will be in 10 years' time.

Belysa Executive Condominium in Pasir Ris.

One of the main factors could be the increasing number of completed units whose owners have yet to renovate or move into. Some of these EC developments include Esparina Residences in Sengkang, Belysa in Pasir Ris and Riverparc Residence in Punggol. ECs are particularly attractive to young families as they are poised to help them move in the private property market eventually. A hybrid between public and private housing, buyers of executive condominiums are able to utilize the public housing grants for the initial purchase, and after 10 years, the property becomes privatized and owners can then reap the profits from selling the units in the private property market.

There are also a number of home owners who have purchase units to make use of the public housing grants they are eligible for, but do not yet need to live in them. They may opt instead to rent out their units after the 5-year minimum occupation period (MOP).

As the overall property market weakens and the HDB resale market remains flat, HDB upgraders who may have planned for a move are finding themselves unable to find a buyer for their existing flat, thus have yet to move into their new ECs.

Is the EC market softening? And will it continue to do so? Currently vacancy rates are at 6 per cent according the URA figures and thus far 739 units have been left vacant. What does this signify for 2014 as the year makes its way into the last quarter?

Property market slump continues

Resale home sales and rental prices have continued to soften as we reach the middle of Q3. July proved to be rather quiet for the resale private home market as prices reached a 21-month low, according to the Singapore Real Estate Exchange (SRX) figures.

LakevilleAs more new private properties reached their completion dates and entered the rental market, the number of units for rent increased, which caused the rental market to become more competitive. And as immigration rules tightened, the supply and demand scale tipped in favor of tenants. Rental prices were at a 38-month low last month. And the blow is felt not only in the private property market but also the HDB resale market with prices dropping to a 30-month low in July.

The areas with the largest price decline is the city center, with prices dropping 4 per cent. This is followed by the city fringe areas with a 1.1 per cent dip and the suburban districts with a 0.6 per cent drop. Property experts say that the drop in rental prices could be one of the reasons contributing to the slipping resale prices.

With property prices so closely linked to immigration policies in this small nation, how will the authorities balance the issues of housing and population?

HDB resale flat sales flat

Prices and sales of HDB resale flats have not gone down that drastically, though COV prices are now almost non-existent, but they have remained flat for the last quarter.

April marks a slight rise in the number of resale flats sold, 4.4 per cent up from March. This could be a sign buyers are coming back to the market after having observed the market for almost 3 quarters now and having held out in wait of market stability. As the frequency of BTO flats  launches slow down, buyers who are still in search of a flat which suits their needs, may it be price, location or size, could be more willing to purchase on the resale market now.

Resale 5-room HDB flat on King George's Avenue with asking price of more than $700,000.

How will the HDB market perform in the upcoming months? Analysts and experts are expecting prices to fall very slightly before stablising in the third quarter of this year. Overall, prices for most HDB flats fell, with the exception of executive flats of course. A 1.2 per cent rise was recorded for that sector.

With rents also coming down, mainly due to the decreasing demand as the foreign workforce diminishes, buyers of HDB flats are also more likely to think of their purchase as a long-term home occupation investment rather than to count on profiting from rentals.

The second half of 2014 and the first quarter of 2015 would be an interesting time for the HDB resale flat market, a time to find their footing and possibly find ways to turn itself around.

The Resale HDB flat rollercoaster ride

A year or two ago, the property market was at its peak and now, it seems to be have taken the quick dash down. With the fervent entry of new HDB flats and private properties over the last 3 years, the market is now facing a possible glut. The continuous implementation of property cooling measures also accounted for much of the decrease in activity over the last 2 quarters.

The resale market for HDB flats seem to have taken a dive due to the bumper crop of BTO flats. Photo courtesy of Singapore Tourism Board.

The resale market for HDB flats seem to have taken a dive due to the bumper crop of BTO flats. Photo courtesy of Singapore Tourism Board.

Data from the Urban Redevelopment Authority seems to signify a peak in home supply in 2016. That is when most of the properties purchased in the past 2 years will be completed and ready for occupation. That might mean many will be compelled to sell their existing homes and the resale HDB flat market may then face yet another challenge then. By 2016, 33,290 homes are expected to be completed.

In the resale HDB market, transactions have been at an all-time low since 2005. Prices fell by 0.6 per cent, and sellers may find themselves at the mercy of market demand. Median COV prices are now $10,000 and below. No longer are the days when sellers could command exorbitant cash premiums, which have to be paid upfront.

Most buyers in the resale HDB flat market now are upgraders or PRs. But the pool of buyers may have diminished as buyers may be restricted by loan limits and reduced number of foreigners granted permanent residency. PRs are now only allowed to purchase HDB flats after a 3-year period. Property analysts are expecting interest to rise again after the first half of the year, as low prices bring the buyers back.

Turning down the heat on the HDB Resale market

What are the reasons for the constant upward climb of HDB resale flat prices? If demand is lower than supply, it would naturally tune the prices up a notch. Yet the question is, how do you increase the supply of resale flats? Yes, now BTO flats are being built but not everybody is Singapore is able to qualify for one in that category. Those who fall into the category of people who need to buy from the open market include Permanent Residents (PRs), Singles, families whose combined income disqualifies them from applying for a new flat, and various others who may not be able to afford a private apartment yet are finding it increasingly difficult to afford even a resale HDB flat. What then  should these folks do to put a roof over their heads?

Many are holding on to their flats in order to secure income through rental. How much of this rent is declared as income? Now that is another questions, a crucial one in fact. Perhaps as long the landlord of an existing HDB flat is able to earn a good income, supplement it through rental of rooms, there is little rush to sell it.

Although HDB has already implemented a restriction on the number of years PRs can sublet their HDB flats, as long as many are still holding on to their HDB flats, there will not be sufficient resale flats in the open market available for the rising groups of individuals or families who can only purchase one from the open market. Perhaps the question lies in whether HDB flats are still considered public housing or are they simply that in name? Have the increase in BTO flats helped keep prices at a realistic range? Will there come a time when the rules limit property purchases to only one per person if one of the property is a HDB flat? It might seem severe or unthinkable. But that day might come.

HDB Resale flats – COV up

Are more HDB flat owners hoping to get more out of their flats as the property market heats up once more? It may seem that way as COV prices on again on the rise. Up $3000 from $30,000 in Q3, COV prices in Q4 prove to be climbing, according to data from the Singapore Real Estate Exchange (SRX).

Tampines HDBThe decreasing number of resale HDB flats in the market could be reason for this rise since rarity is often equated to rising prices. And the reason for few HDB Resale flats could be due to the rising prices in the private residential property market. This means more HDB upgraders may rethink their decision to sell, or if they do, they may put a higher price tag on their existing HDB home.

Although HDB has built a record 27, 000 Buid-To-Order (BTO) flats this year alone, the supply is still insufficient to meet the demands of second-time applicants, which also means they have to turn to the resale HDB flat market, where competition is already high especially with permanent residents and singles in the same buyers pool.

Perhaps the effects of the new BTO flats have yet to sink in but industry experts are expecting it to take effect when the BTO flats are ready for occupation.

Why I Chose HDB Over Private Property

When deciding on a property—one that you and your family will call ‘home’—there are some important factors besides finance that you should keep in mind.

As a foreign-born HDB dweller, my housing decisions have been often inquired upon. With this article, I hope to shed light on why I chose a HDB flat over private property, and why Sengkang West of all the housing estates. I will also offer some friendly guidance to those also looking to make Singapore their home.

Celebrations at Sengkang West. All images courtesy of Peter Breitkreutz.

Celebrations at Sengkang West. All images courtesy of Peter Breitkreutz.

Resale HDB: Are you qualified?

This should be the first checkpoint for non-Singaporeans deciding between HDBs and private properties. For those considering resale HDBs in particular, there are quite a few eligibility conditions and legalities you should take note of beforehand. For instance, resale HDB buyers have to be Singapore Citizens or Permanent Residents, or have at least one such listed occupant. In terms of regulations, there is one rule widely covered in recent news: you must sell off any private property you already own within six months of purchasing a resale flat. More information can be easily found on the HDB InfoWEB.

Unless you meet the stated criteria, your best bet is private property. In case anyone was wondering, PRs are not eligible to purchase new HDBs.

Condominiums: Are you sure?

Why not a condo, you ask? Very good question!

When we first moved to Singapore sans PR status, we did not want to do the stereotypical expat thing and move into predominantly foreign communities. After spending some time searching for the right location, we thought we couldn’t get any more ‘heartlander’ than moving to Woodlands, the northern-most part of the island.

However, we failed to realise that moving into a rental condominium still meant that we ended up surrounding ourselves with a non-local community. Additionally, security guards and boom gates ensured that we were practically locking ourselves out of the community, and the community out of our lives.

Sure, the facilities (pool, gymnasium, function rooms) and privacy that come with condominiums are attractive. But the security measures, in particular, did little to make us feel safer in a country that already boasts one of the lowest crime rates in the world. Neither was it helpful in integrating us into the community we so desperately wanted to belong to. It felt almost like we were on an extended business trip at a resort; definitely not like a place I’d call home.

After a few years there we decided to explore our options, this time deciding not to rent. The dramatically fluctuating rental market then affirmed our decision, but it was not our main motivation. It dawned on us that to really integrate and root ourselves, boots and all, in Singapore for the long term, we needed to stop living the ‘pretend heartlands’ lifestyle. Even now, we still hold the belief that rent money is dead money when it comes to planning for our future in Singapore.

This decision then led us to the resale HDB option.

We soon realised that many five-room HDB flats (or ‘three-bedroom’ in foreigner speak) were larger than modern condominiums, and the newer HDB buildings and estates were styled similar to condominiums. New HDBs were taller, with fewer flats per floor, an elevator at every level and actual hallways within the flats!

Our current apartment has 22 floors with only four ‘point blocks’ on every level. It has a layout and style similar to our former private home, but with more area and a lovely view. Of course, the difference was the lack of private pool and security.

Sengkang West HDB flat.

Sengkang West HDB flat.

HDBs: a golden opportunity for integration

If not for living in an HDB estate, we never would have gotten the chance to serve the community.Joining a local grassroots organization not only satiated my passion for charity work, but also afforded us a key opportunity to know and befriend those in our community. Another step towards integration in our new country!

I am now a grassroots leader and member of the Anchorvale Community Club Management Committee, with a community network that now stretches across Sengkang West. We are proud to be part of a strongly bonded community, where it is very rare to visit neighbourhood shops and eating places without running into people we know. We now treat our neighbours like family, and vice versa!

I think such a deep integration at the grassroots level is not impossible should we have opted for yet another private property, but I am sure it would have been much more difficult.

A family carnival at the HDB heartlands makes a good opportunity to get to know neighbours.

A family carnival at the HDB heartlands makes a good opportunity to get to know neighbours.

Sengkang West: Who are the people in your neighbourhood?
As a young family with two ickle boys, we fit in quite well in Sengkang West, which was then (and is still considered) a relatively new and developing part of Singapore. We have seen so many new buildings sprouting up over the years, and practically grew up with this estate.

Furthermore, as we are still considered a foreign family, joining a blossoming community instead of a mature estate was in hindsight also made it a little easier for us to cultivate a sense of belonging.

Family time at the park.

Family time at the park.

HDB for the long haul

When it comes to deciding between HDBs and private apartments, it’s all about your personal motivations and your desired lifestyle in Singapore.

For us, we wanted our locally born children to be completely immersed in the culture of their birth country. Our elder boy now attends a kindergarten near our home, swimming classes at the public sports complex, and art classes at the local Zone E RC office. His best friends are Singaporeans too. By living in the HDB heartlands, we plan to eventually enroll him and his brother in a local school.

We would not dream of giving up our HDB lifestyle in a million years.

Meeting Senior Minister Lee Hsien Loong.

Meeting Senior Minister Lee Hsien Loong.

So if you’re looking to truly make Singapore your home, I think the answer is a no-brainer: move out of the expat comfort zones and into the HDB heartlands. It’s a decision that has fulfilled my life; I am certain yours will be too.