HDB property market – Has balance been struck?

The last four years saw aggressive moves by the Housing Development Board to release and build new HDB flats. In 2014 alone, 51, 598 new HDB flats were added.

Has this supply of new flats been effective in stabilising the property market? Is the supply and demand scale now balanced? Minister for National Development, Mr Khaw Boon Wan, has mentioned that the increased supply has helped move the selling price of HDB flats down, yet at a gradual pace and margin which buyers are still able to stomach.

WEst Rock HDB FlatFrom this year on, the number of new HDB flats will begin to decrease, from 50,796 this year to 38,316 in 2018. Which could mean that this year might be the watershed year for the HDB market. Will buyers be taking the opportunity to purchase before supply becomes tighter once more? Or will the number of HDB flats which have been released thus far be able to provide for a stable resale market, keeping a level playing field between buyers and sellers?

As Singapore grows in population size, and global and domestic economies fluctuate, all this would also be tightly linked to population and immigration policies. With the election possibly coming our way next year, buyers may take the chance to look out for opportunities to upgrade property-wise this year, or perhaps wait and see what the post-election changes may bring.

Housing supply to slow down in 2015

The authorities have announced that public housing supply and land sales will slow down come 2015 as the market has showed signs of cooling and stablising after the many rounds of property cooling measures rolled out over the past year or two.

West Terra HDB Bukit BatokPhoto Credit: HDB

The Minister for National Development, Mr Khaw Boon Wan, has commented in a blog post that the supply of new HDB flats will slow by 25 per cent next year. There will only be 4 launches next year, compared to the usual 6 per year. Each launch usually puts out up to 4,000 new Build-to-order (BTO) flats. The rate of successful BTO flat applications has been on the rise as reflected in the few recent launches. More married couples achieve success in getting their new flats, and the authorities have been allowances for couples either opting to apply for a flat with their parents, or for one near their parents. In addition, parents who opt to apply for a flat in a non-mature estate to be near their married children, will also receive priority.

The slight shift in policies may ensure that families remain close-knit and are able to receive help when needed. It may also help with a shift in aging mature estates and introduce a more age-balanced population per HDB estate. Mr Khaw Boon Wan also hopes that the move will help newlyweds plan for a family more efficiently and in turn increase Singapore’s population with a higher birth rate.

In the private property sector, the number of land plots being sold for executive condominiums and private apartments has already been reduced this year, though the industry might see a further reduction come 2015. But will this mean a decline in the building, construction and property industries? Or has the previous land sales and launches been sufficient to keep the industry going for the next few years? Which part of the cycle is the property sector in at the moment and are we set for a boom or lull in the next year?

Property cooling measures will remain for now

Ever since the Total Debt Servicing Ratio (TDSR) framework was implemented a year ago in June 2013, the home financing front has taken a big hit. But the authorities are not ready to loosen the reigns on the cooling measures just yet.

The Ministry of National Development (MND) is taking its role in “ensuring a stable and sustainable property market” very seriously indeed. Besides the debt servicing framework, it has also increased stamp duties on second and subsequent property purchases, coming down hard on speculative property-buying.

Eight RiversuitesConsidering the fact that home prices have almost doubled in just four years’ time, the word ‘inflation” does not even cover the extent of the increase. With the rate of increase, especially in mid-2009, the authorities may be rightfully wary of the reverse effect should the measures be lifted now. Prices might very well rocket even higher and then there will be no bringing it back down. And that may impact the social and economic tensile strength of the young nation.

On the other hand, the interest rates at the banks are low for now, and it is an incentive for taking out loans. But with the TDSR framework, how many qualify for these loans and will Singaporeans now look outside of Singapore to invest instead? How will that impact Singapore and her plans to become a global city?

Drop in government land supply

And this will happen come 2014. As numbers in both public and private property markets signal a soon-to-be oversupply, developers are cutting back on the number of land plots they bid for, and the authorities are getting the hint and hence cutting back on the supply of land.

A wise move perhaps to prevent a property bubble, though the first major move could be the tightening of loan limits implemented middle of the year. Only enough land for 11,600 new homes will be released in Q2 of 2014. That is 17.3 per cent lower than Q2 of 2013. The warning signal came in November from the Real Estate Developers’ Association (Redas) and it seems the Ministry of National Development (MND) has kept their ears open and made an announcement on Wednesday regarding the reduction.

THe CrestEven so, the market can expect 65,000 new residential properties to enter the market within the next 3 years. And this is expected to fulfill the housing demands of the population without sacrificing sales figures. 8 plots of land will be put up for sale in the first half of next year, and most of them will be in suburban areas such as Yishin, Sembawang, Sengkang and one at Prince Charles Crescent in Redhill next to The Crest. These plots will also yield some 2, 2000 executive condominiums (ECs).

The market will see the building of more executive condominiums, which may slow the private property market down a little, but still keep the number of new homes in the black. However, these hybrid homes will become available in the open market in 5 years’ time and this slowing down of supply in this sector may be a well-timed move.

More smaller HDB flats to be built

Though the supply of HDB flats may be reduced starting next year, National Development Minister Khaw Boon Wan has said that these may apply only to the larger four- and five-room flats. Smaller two-room and studio flats will still be steadily supplied in the coming year or two.

5,000 new two-room flats are targeted for 2014, and since response from singles applying for new HDB flats have been overwhelming, with 58 applicants for 1 unit since the scheme began in July this year, this will be greeted with much cheer.

Photo Source: Ministry of National Development.

Some larger HDB flats will also be made available to second-time applicants. But this shift in supply is to balance out demand for BTO (build-to-order) flats between singles and families. And since demand from families have mostly been met, the shift to releasing smaller units will allow for more success from other applicants such as singles, divorced families and young couples.

Is this halt to releasing larger HDB flats an effective way to adjusting the dynamics in the housing market? Will there be a kickback reaction in the private property market? What is the percentage of the population who are able to afford private housing and will that percentage increase five years down the road or will the building of HDB flats continue to dominate much of the nation’s housing supply?

Foreign property buyers not biting

National Development Minister, Mr Khaw Boon Wan has announced a significant drop in the number of foreign buyers of property in Singapore, from 17 per cent in 2011 to only 7 per cent in Q3 of this year. From 1, 400 transactions per quarter in 2011, it’s now down to 330 transactions last quarter.

Was the high in 2011 reason for the government implementing the 10% Additional Buyers’ Stamp Duty (ABSD) in December of the same year, and is the current drop the intended goal of that exercise? Sub-sales, which are an indication of the property speculation level in the market, has decreased by 3 per cent. It stood at 7.6 per cent in 2011.

The Creek in Bukit Timah.

The Creek in Bukit Timah.

This year, there were a few rounds of property cooling measures, including a new debt-servicing framework and also caps of loan limits. Increase in the ABSD percentage may have also put a bitter taste in the mouths of some investors. The luxury market has been quiet for awhile, but property developers seem to be hopeful about next year, with some holding back on launches, waiting out the year-end festive period which is usually a lull period for the property market.

Moving forward, Mr Khaw says regulatory policies will need to remain nimble in order to deal with a fluctuating and ever-changing industry. Although many other countries have had stricter property-buying rules for foreign buyers, such as in Australia, it does not necessarily mean the property market is entirely stable. They are in fact experiencing signs of a property bubble and thus being able to react to market response is a skill the authorities will have to hone. Perhaps also with some good luck on the side.

There are no restrictions on foreigners purchasing properties in Hong Kong. Will investors turn their attention there instead? A comprehensive listing of properties for sale and rent are available at GoHome.com.hk.

There are now increasing restrictions on foreigners purchasing properties in Hong Kong. Will investors turn their attention elsewhere instead? A comprehensive listing of properties for sale and rent are available at GoHome.com.hk.

In Hong Kong, the government is already imposing a 50% down payment on properties. With the minimum sum raised six times over less than three years, they seem determined to find ways to make homes more affordable. The Singapore government has not resorted to such drastic measures yet, but in future, will we go down the same road? Will more Singaporeans be able to afford their own homes then?

204, 500 properties to be completed by 2016

At 6,508 more units than the 197,566 units projected earlier this year, there will be 204,500 executive condominium and private apartment units built by 2016, according to data released by the Urban Redevelopment Authority (URA).

Completed condominium units are increasing in number as developers pour fresh new stock into the market mix. Despite having held back on some major launches as the year-end lull draws close, the number of properties available in the market continues to rise. Industry experts are however expecting developers to lower their launch prices in order to boost sales.

The CreekFrom the looks of the recent Inflora condominium launch, selling prices, of new properties at least, may indeed be on the slippery slope. But that perhaps might be good news for those looking to invest. Properties in the prime city centre spots are dropping by as much as 0.5 per cent whereas city fringe and suburban areas enjoy continued growth, however slight.

Over the next 3 years, 4, 884 more private homes will be built as National Development Minister, Mr. Khaw Boon Wan considers it “making good progress in our ramp-up of the home-building programme”. The number of HDB flats to be built will remain the same as projected. 1, 355 executive condominiums will be ready within the same time frame. What does this heightened supply mean for Singapore’s housing market and will the population growth be a reflection of a cause of this increased property growth?

New Property Loan Rules

Over the weekend, new loan rules were put in place. Tougher rules targeted at reining in property investment, according the Minister for  National Development, Khaw Boon Wan. These new rules look set to be a permanent fixture in the financial landscape as the government looks to stablising Singapore’s real estate market.

money-imageAs such, they are refraining from calling it a cooling measure. It is structured in a way to better stablise the property market here as the current low interest rates are not sustainable. Implemented by the Monetary Authority of Singapore (MAS), banks now have to follow the new guidelines when assessing the property buyer’s loan eligibility.

Should the monthly repayments of a buyer’s total debt obligations exceed 60 per cent of his gross monthly income, the bank will have to decline his loan application. Mr Khaw says that these new rules will not affect buyers truly looking for a home, since it will essentially apply for those looking to purchase their second or third properties. The inability to afford rising mortgage as interest rates fluctuate, which then results in a more rapid rate of asset liquidation may be what they are attempting to catch before the wave happens.

Besides property investors, these new rule will also help banks better understand and manage the potential changes as interest rates eventually bounce back up. Is this an effective and timely move by the Singapore Government to curb a potential housing bubble? How will this affect the upcoming property launches?