HDB flat rentals stay low

The play between supply and demand never gets old. And the tug-and-push continues as rental demand for HDB flats remains lacklustre possibly for the rest of the year.

Immigration policies seem to be the main factor at play, keeping foreign workforce numbers low and thus affecting the demand for rental properties. According to the Singapore Real Estate Exchange (SRX) figures, the HDB rental index has fallen 2.3 per cent.

But is this the deepest pit of the slowdown or will it continue? Industry experts are predicting this as only the beginning of the rental drop. Sales prices of HDB resale flats have already begun on their downhill journey and though the drop is not drastic, it is rather significant for the year. Most property analysts are expecting a 4 – 7 per cent drop by the end of 2014.

Woodlands HDBNaturally, areas which are further away from transport nodes such as bus stops, main expressways or MRT stations are most affected. HDB flats near MRT stations will continue to hold their prices, whether in sales or rent. Some of the flats fetching the highest rent are in the Central, Bukit Merah and Queenstown estates. Prices range between $2250 for a 3-room flat to $2, 900 for a 4-room flat.

Although Woodlands seems far to many, the area is favoured by many tenants, perhaps due to its proximity to the causeway. Rental prices of flats in the area is lower, between $1,700 to $2, 000 for a 3- or 4-room HDB flat, but demand is higher and the ease of finding will benefit flat owners in the area.

Another reason for the falling rental rates might be the increase in the number of properties available for rent across the board. With some private suburban condominiums reaching completion and some in popular HDB estates, the competition will definitely heat up. 2014 seems pretty set its way for now, but there is always 2015 to look forward to.

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.

bto-families-ft-st-b2
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?

Singapore Re-zoned for homes

In the next decade, be prepared for half a million new homes as land everywhere around the island will be re-zoned to home Singapore’s growing population. With plans for most of them to be in the Paya Lebar and Greater Southern Waterfront areas. In the Holland Village, Kampong Bugis and Marina South areas alone, 14, 500 new homes are expected to take root.

Tampiens North

In the greater scheme of things, 3 other major districts are expected to see a boom in residential properties, both public and private:

And planning even further ahead past 2030, the Paya Lebar area will welcome up to 500, 000 new homes as there are plans to move the Paya Lebar airbase to Changi East, yielding 800ha of land for re-zoning purposes.

BidadariThis shift of land use and rearrangement of population across the island is all part of a growing country’s historical progress, and depending very much on how Singapore’s economy performs in light of the global situation will determine other policies which may in turn affect the direction property growth takes. But in the meantime, prospects seem positive and for a quick investment turnaround, shoebox apartments in the suburbs are still considered one of the most profitable investments.

COV prices no more?

In fact, some sellers are even letting their HDB flats go at below valuation. Once a highly-debatable amount, these cash-over-valuation (COV) prices are now almost all gone, or miniscule at the least. Although these amounts are set by the seller, above the HDB valued selling price, it is usually a good indication of how popular a unit is, and whether the seller was looking to earn some bucks from the sale. But recent mortgage rules have affected the demand for resale HDB flats and according to HDB, in October alone 105 units were sold at less than their HDB appraised price. This is a significant number, especially as its a good 6.7 per cent more than the earlier half of the year. .

Book Lay View HDBThe mid-year announcements by MAS of stricter mortgage terms such as the introduction of the TDSR (total debt servicing ratio) and shorter loan periods have left many buyers reconsidering their property purchase more carefully. In addition, Singapore permanent residents now have a 3-year wait before being able to purchase a resale HDB flat. In January, the median COV stood at $35, 000. In October, it has fallen to $12, 000. Many sellers who have held on to their COV asking prices, have had a long wait, and some have given up and reduced their COV prices.

Areas where a larger amount of new HDB flats are being launched, such as Punggol, Sengkang and Chao Chu Kang, are harder hit as the buyers of resale flats in these areas will be diverted. BTO (build-to-order) flats are considerably cheaper than their resale companion. As singles and young couples are now hampered by a lower loan percentages, 30 per cent of their gross monthly income, many are no longer able to afford high COVs, even if they truly liked the unit. And as the building of new HDB flats are happening in quicker cycles, many BTO flats which are now eligible to be placed on the resale market after their 5-year MOP (minimum occupation period) tenure, will have to compete with more new flats nearby. As some families are keen to move to be near their children’s schools or because of family situations, there may be more resale flats going at or below valuation. How does this impact the HDB flat market in 2014?

And the winning number is 8, 952

That’s how many new BTO flats was launched by HDB on Tuesday this week. This is a combination of SBF (Sale of Balance Flats) and new BTO (Build-to-order) HDB flats. The former were mainly in mature estates and might have been a bigger draw since they will be situated in 13 popular estates including two units at Pinnacle@Duxton in Tanjong Pagar, and a very rare “public landed home” in Jalan Bahagia. It’s a three-storey terraced house which once sold, has since been returned to HDB. It is going for $795, 000. There are just 285 of these homes in Singapore, build by the Singapore Improvement Trust, which existed before the HDB came into place.

Admiralty Grove HDB flatEver since singles became eligible for new BTO flats, albeit only two-room ones and with caveats, they have constantly been oversubscribed at every launch. And this trend may continue for quite some time to come, as it obviously shows that demand has yet been met. In July alone, 519 such units were launched but 8, 800 applied. That’s almost 17 people vying for 1 flat.

There were 4, 978 BTO flats in Bukit Batok, Hougang, Sembawang, Woodlands and Jurong West in this most recent launch. Prices range from $75, 000 for a 2-room flat in Woodlands to $373, 000 for a 5-room one in Bukit Batok. Has enough, or more than enough, been done to efficiently house Singapore’s growing population?

Triple the Subscription at Skypark Residences in Sembawang

506 units at Skypark Residences Executive Condominium (EC) in Sembawang, and 1, 604 applicants. That’s more than triple the number of units available.

This new EC will feature a 1, 250 sqm Skypark 50 meters above ground. Nothing to rival that of the Marina Bay Sands of course, but as high-rise living becomes more the norm than the exception, having a piece of greenery of your own might be more precious a commodity in the near future than you think. Applications came mainly from HDB upgraders and larger multi-generational families.

Skypark Residences ECPerhaps the possible lack of new EC projects in the few years to come have driven buyers to jump on this last opportunity of 2013 to upgrade. Created as a stepping stone for HDB owners into the private property market, executive condominiums have become a rare public-private housing hybrid which has immense potential especially since it becomes a private property after five years and owners can then sell to foreign buyers after ten years. The projected number of new EC launches in 2014 is two.

But there’s still time yet. Bookings will open on 16 November. Prices are expected to range between $720psf to $800 psf. Will more be wiling to bet their chances at applying for an oversubscribed executive condominium in a quiet neighbourhood or purchase a ready-to-live unit in a completed or almost completed suburban condominium? Are long-term benefits on the minds of property buyers or are short-term capitals what they are gunning for?

Waterwoods – Luxury in this neck of the woods

Private lift lobbies. Maisonettes. This are just a few of the lovely features at the Waterwoods executive condominium (EC) launched recently in Punggol East. Out of the 373 units, there will be 16 maisonettes and 32 five-bedders (there will be 49 in total) will have private lift lobbies. The project is developed by Sing Holdings and UE E&C and will also feature penthouses.

Waterwoods Punggol ECExecutive condominiums are a hybrid between private and public housing. Buyers can apply for grants from HDB and after the minimum occupation period, are able to sell the properties on the open market as private condominiums. After 10 years, selling of the units to foreigners is also possible. As resale HDB flats’ popularity take a hit, the rising popularity of ECs is certainly understandable, as their pricing is often comparable to resale HDB flats, but yet often well under private apartment prices. It also helps that these ECs often come with amenities and are located in prime locations, near MRT stations or bus interchanges, for example.

Other recent EC launches include Lush Acres in Sengkang and Ecopolitan in Punggol with prices averaging $790 psf. Prices at Waterwoods are expected to vary within the same range as well. E-applications have been open since 27 September and will close on 6 October.

Shoebox rental units stepping up

Demand and prices of small shoebox apartments had dipped in recent months. But the silver lining is showing on that tiny dark cloud, shining through. Rental prices of apartment units in suburban regions have risen in the second quarter of 2013.

Shoebox units had been, and perhaps will continue to be, all the rage the last couple of years, as property investors saw the potential of these units largely due to the low total cost but higher percentage in rental yields in these 540 sq ft (50 sq m)  or smaller homes. R66 apartments near Farrer Park MRT station fared especially well, with a 5.8 per cent rise.

R66 ApartmentsRecent home loan curbs and restructuring of PRs’ benefits in the HDB market may push more towards the private property market, which may in turn mean more PRs have to consider more seriously the possibility of first renting a small apartment whilst waiting out their 3-year period before they qualify for public housing. And as the population in Singapore grows, it may not be entirely possible that the waiting period is amended in future. And by then, these compact living quarters may see a surge, or drop, in demand.

For now, industry experts are expecting rental prices to sustain it’s high even while more such property types surge into the market. They are also looking at a higher ratio of tenants to apartments playing to the favour of property owners. Location, however, remains the determining factor. A wisely selected property may help the buyer rake in substantial profits and it shows in the sales of apartments priced below $1 million. The number of units sold almost doubled in Q2, with 738 sold as compared to Q1′s 310 units. Could the rate at which prices are rising and falling, and at which new rulings are rolled out  show that the cycle is becoming shorter and market fluctuations are more unpredictable?