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?

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?

HDB Goes Big

With 3 upcoming projects. Waterfront living. Integrated hubs. Sandy beaches. Regional hubs. These are but a few of the amenities which will await new HDB flat owners in Bidadari, Tampines North and Punggol Matilda.

Future Homes Better Lives35, 000 public housing units and 5, 000 private ones will be released over the next 10 to 15 years. That’s quite a bit to consider if you’re planning for the long-term and if you can afford the waiting time. Much of the focus of these new estates is on healthy living.

Here’s a quick look at what each new HDB project will potentially provide:

Bidadari :

  • 10, 000 new HDB flats
  • Man-made lake
  • 10-hectare park
  • Pedestrian walkway with canopy of preserved heritage trees

Tampines North:

  • 17, 000 new HDB flats
  • New integrated shopping mall cum  bus interchange
  • 2 new parks
  • Pond with sandy beach

Punggol Matilda:

  • 8,000 new HDB flats
  • Elevated landscaped deck with verandahs, colonnades and pavilion modeled after the iconic Matilda-House
  • New waterfront shopping mall

MND BTO HDB flat exhibitionAnd to boost community bonding, each estate will have a number of community gardens which will also promote healthy living where residents can grow their own produce. Carrying the green thumb message even further, cycling pathways, separate recycling chutes and energy efficiency features will connect the dots in HDB’s plans for new and improved future estates.

Already 500 units at Punggol Matilda will be available in September’s BTO launch. More will go on sale at Tampines North in 2014, followed by those in Bidadari in 2015.

Private property rents may drop

Many property investors count on rental yields, immediate or future, to boost profits. However, with the sheer number of new homes being built and launched, raking in immediate profits may be tougher than before. As population growth slows and immigration policies tighten, finding a suitable tenant may not be easy.

In fact, if you’re thinking of selling your property, resale prices may also suffer because of the surge in the supply of new properties, private and public. By 2017, the market is projected to have an entry of 100,000 new private non-landed homes and 123, 000 HDB flats. At a 7 to 8 per cent increase in annual landed home supply, this may be the quickest that new non-landed properties have grown thus far.

One Eighties ResidencesWhat this means for landlords may be lowered asking rental prices as competiton heats up and tenants have more options to choose from. Based on previous market cycles, when vacancy rates push the 7 per cent mark, rental prices tend to correct and passing the effect down the chain, resale prices will also be affected.

Some industry experts are expecting a 10 to 15 per cent drop in rental and selling prices between now and 2016. However, others are expecting a gentler drop of 5 to 10 per cent as most of the new units are HDB flats which cannot be sold in the open market within the first five years, thus reducing the actual number of available units for sale. In addition, a number of these new homes may be occupied by home-owners rather than merely purchased for rental purposes, thus once again taking a chunk away from available rental units.

Either ways, this may be a time to be smart about spotting value-for-money, investment-worthy properties which have longer legs and can withstand hard knocks from global and local policy influences. Seeking advice from experienced property investors, analysts and attending property seminars are a good way to get started.

Single but not alone

As more help come in the shape of new rulings and higher grants for low-income singles hoping to buy a HDB flat. Starting from this month, singles are allowed to purchase new HDB flats, albeit only 2-room ones. The latest BTO launch includes some of these allocated in Yishun, Sengkang and Bukit Merah. Up to a third of the 519 two-room HDB flats have been put aside for singles.

Orchid Spring Yishun BTO HDBIt may be a bit of squeeze as these 2-room units are usually sized around 35 to 45 sq m but it is certainly an option singles are thankful for having. In the previous March launch of Orchid Springs @ Yishun, there are 108 such units available. And it looks like they are certainly a welcome relief as each unit saw an average of 5 applicants. Industry analysts are expecting more singles to change track and switch from buying resale HDB flats to purchasing these new ones as some of the new flats available are already being built and will be ready for occupancy very soon.

Angsana Breeze in Yishun. Part of July 2013's HDB BTO flats launch.

Angsana Breeze in Yishun. Part of July 2013′s HDB BTO flats launch.

And on top of that, low-income singles earning a monthly income of $1, 125 or less who are looking to purchase their first home can receive up to $30, 000 in housing grants if they apply for a HDB flat on their own. And if it is a joint application with two or more singles, the grant can be doubled to $60, 000. Which may ultimately mean the cost of buying a 2-room HDB flat could be as low as $16, 000. And for singles earning $2, 500 or less a month,  there is up to $20, 000 of grants available should you be looking for a resale flat on the open market. For those earning $5, 000 or less per month, housing grants are at $15,000.

These new changes are seen as positive moves buy the government to push for home ownership and by the response from singles applying for this first round of 2-room flats, it certainly seems like it has hit home. On the other hand, how will this impact the resale HDB flat market?

Property market see-saw: Resale HDB flats down Private Property up.

Growth of resale HDB flat prices have slowed substantially with only a 0.5 per cent growth in the second quarter this year. This growth margin is the slowest since 2009. In Q1, there was a 1.3 per cent growth.

Tampines-HDB_thumb.jpgThe middle quarters of the year are usually the busiest and best time for home sales, thus the slow growth of the resale HDB market at this time could truly be an indication of a cooling market, at least for public housing. In the private real estate sector, businesses are all in order, with a buyers attending the buffet of new and resale properties with a healthy appetite. The momentum is still going strong in the private sector, partly due to the counter-measures by developers on the property curbs, which includes attractive discounts and incentives.

Perhaps dimming interest in resale HDB flats could be due to fact that buying public does now provide you with any discounts or savings except with the HDB CPF housing grants. And with the tightening of loan limits to 30 per cent of the buyer’s income if a bank loan is taken, and 35 per cent if a HDB loan is taken, second-hand HDB flat buyers have even less incentive to stay in the HDB market. Are potential HDB flat buyers turning to the private market instead? Though they may have to pay more, the option of going private might prove to be a big pull factor.

Golden Mint HDB flat

The next launch of new HDB flats will be a particularly exciting one, especially since singles will be included in the mix of applicants for the first time. 3,800 BTO flats are planned for July’s launch. Singles eligible to apply for new HDB flats must be 35-years-old and above, and with a monthly income of $5,000 or lesser, and are only allowed to ballot for 2-room flats.

HDB Resale flat sales lowest in 16 years

The numbers are low but the prices may not be so. Is this a case of rare treasures raking in high prices?

HDB’s reports have shown that there were only 4,335 resale flat transactions in Q1 of this year, as compared to the average of 8,000 for the first quarters in previous years. However resale flat prices have continued to increase with a 1.3 per cent rise this year. Albeit slower than the 2.5 per cent increase from Q4 of 2012, it is still a 0.6 per cent rise when compared year on year.

Photo by HDB.

Photo by HDB.

The latest property curbs could have had a part to play here. HDB flat buyers can now only loan up to 35 per cent (previously the cap was at 40 per cent) from HDB and bank loans are now capped at 30 per cent of the household income. Thus with these restrictions, some may now not be unable to upgrade to larger flats and thus taking away a considerable pool of buyers from the resale HDB flat market. PRs who previously form a significant number of buyers, may also be out of the picture as they are now subjected to an additional 5 per cent tax on their first home.

Skypeak @ Bukit Batok. Photo by HDB.

Skypeak @ Bukit Batok. Photo by HDB.

But with the drop in flat buyers, there is in turn an increase in flat renters. HDB reported a 15 per cent rise in subletting transactions, to 7,410 this quarter. The money is coming through rental now as more HDB owners hold on to their flats, hoping to reap in enough profit to help them make the leap to private property.

This, plus the number of new HDB flats being launched and built last and this year, have drawn buyers away from the resale market. Which type of resale flats are seeing the most activity? Is there now less competition for the larger 4 and 5-room flats? Are 3-room flats the current “hot property”? Come July, singles will also be able to purchase new flats directly from HDB. Will this impact the demand for the smaller 2 and 3-room flats?

Changes to Exec Condo housing scheme?

2013 might be the year of housing policies shockwaves. Earlier in the year, news of singles being about to purchase new HDB flats directly from housing board stirred the market a little, then there were the limits placed on dual-key apartments which are now only available to multi-generational families. A cap was also put on the size of executive condominium (EC) units, at 160 sq m. ECs have been put under the microscope of late, with some questioning the amount of subsidies buyers are receiving from the government.

Forestville Executive Condominium.

Forestville Executive Condominium.

Certain members of public have questioned whether EC buyers should receive any government subsidies at all, since they are able to or willing to afford million-dollar units in both new and resale developments. The executive condominium scheme was initially set up by the government in 1996 to help families transit between public and private properties. But as the price gap between ECs and private properties now draw close, there has been a niggling thought about whether changes should be made to this scheme.

National Development Minister Khaw Boon Wan recently highlighted that there might soon be changes in the EC scheme and buyers and developers are poised to react. Forestville, the next EC to launch in June this year, might benefit from increased response since buyers might be leaping at what may very well be their last chance to secure a unit under the current conditions. EL Development‘s Lim Yew Soon has this to say: “Whenever policies change or are alikely to, the immediate launches will have the biggest benefits. There’s a good change that buyers may snap up existing ECs to ensure they still receive the grant.” Will resale ECs also benefit from this rush?

Should there be a drastic adjustment in government subsides, the most affected might be first-time buyers. Buyers and owners of existing ECs are imploring the authorities and public to see things from their point of view. Engineer Eddy Lau, 40, said, “It’s not right to just look at the profit we make. We also pay more in interest over the years for the EC. For us who are sandwiched, ECs are the only option to upgrade.”

Ultimately, the question that probably begets the Government is, what defines “sandwiched class” and what are the housing schemes actually meant to do. And perhaps only honest answers will help everyone fully understand and accept Singapore’s future housing situation.