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.

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.

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?

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.

Pinnacle @ Duxton almost ready for resale market

50-storeys high with sky gardens and sitting at the top of an excellent location, the Pinnacle @ Duxton will soon be ready to enter the resale market as the five-year minimum occupation period (MOP) comes to an end in December this year. Will the peak of resale HDB flats prices be found in this exclusive public housing development? And how many of the flat owners will be looking to sell? In the current market lull, will more be looking to rent out their units instead?

It seems the resale market can ready themselves for some high prices. Ahead of time, one seller who has received special permission to sell the unit has had more than 50 viewings and offers of up to $830,000 for the 90 sq m four-room HDB flat.

Pinnacle @ Duxton was awarded the 2011 Urban Land Institute (ULI) Global Awards for Excellence. Image by HDB.

Pinnacle @ Duxton was awarded the 2011 Urban Land Institute (ULI) Global Awards for Excellence. Image by HDB.

With a total of 1, 848 units in the massive 7-block development, there will no doubt be competition, though most of the units being put up for sale now are four- and five-room flats. Prices nearing the million dollar mark will be expected. Even the Minister of National Development, Mr. Khaw Boon Wan, has said that when units at the Pinnacle are ready to hit the market, “there will be many millionaires there”.

Those who are ready to sell may be those who are hoping to move into the private property market as the amount they might earn from the sales could be double, if not triple the amount they originally paid for the units. When they were sold in 2004, five-room flats were priced only at $345, 100 to $439,400 while the four-bedders cost $289,000 to $380,900. Considering the prime location of it being near MRT stations, new businesses, a hip area of cafes, restaurants and pubs, the bustling Chinatown stretch and the Central Business District, it’s not surprising that public housing in the area has continually received high-priced offers. Most five-room flats in the Tanjong Pagar and Cantonment Close area have fetched above $800,000.

The only thing that might stop buyers from coming would be the mortgage limits. But as the market awaits the day the regulations are relaxed or policies changed, flat owners may continue to hold on to their asking prices, at least at this iconic building.

Smaller apartments gaining popularity once again

Just a couple of years ago, there were debates about whether homes were becoming too small for comfort as the 500 sq ft studio apartments or shoebox units took the market by storm. Some shunned small units, preferring instead to go for larger ones with a lower psf price.

But now as loan limits are truly showing their might, buyers are favoring smaller apartments once again due to their lower quantum prices and the ease of rental. Though not all are flocking to shoebox units, after all, young families do need a reasonable amount of space, the average home size has dropped to 947 sq ft from June last year. And for HDB upgraders, their chances to move onto the private property market might have become slimmer, especially if size is a major consideration. The average 4-room HDB flat is around 969 sq ft.

CIty GateOne- and two-bedders have increasingly become more popular with buyers as they are usually within their budget and investors find them easier to rent out. URA figures in fact also showed that new residential properties have also featured smaller units, with the average size being 753 sq ft. But this hardly comes as a surprise as home size has been shrinking since 2009.

The other popular property  type is the dual-key apartment which provides the atmosphere of having two separate living spaces within the same home. Some of these units share the same entrance but separate facilities such as kitchens and toilets, while others share the same facilities but have separate entrances, providing privacy for bigger families and offering more rental options.

As we progress into the second half of the year and the market evolves in reaction to buyers demand and supply of land, will developers be quick to re-strategize and cater to the majority?

Resale HDB flats prices dip

The number of resale HDB flat buyers is diminishing. At its two-year low last month, the number of flats which exchanged hands in May was 1, 320. In April, 1, 484 resale flats were sold. Prices also fell 1.2 per cent in May, the lowest since April 2012 according to the Singapore Real Estate Exchange’s (SRX) price index.

Marsiling Greenview BTO HDB FlatThe most common reason for the drop was the loan curbs. This has prevented many buyers from securing a desired loan amount, thus unless they have a large enough cash reserve, it usually puts a resale flat out of sight. The number of transactions in March and April were more positive but that could be due to the pent out demand following the festive season in January and February. Other possible reasons for May’s drop could be the release of new BTO and SBF (sale of balance) flats by HDB in the same month. The latter SBF flats are usually more popular with location- and price-conscious buyers as they are cheaper than resale flats but yet are situated in mature estates.

But what about HDB upgraders who are have purchased private properties? Unlike private property owners who are not allowed to purchase HDB flats, HDB flat owners are allowed to purchase private properties. But as buyers play the waiting game, resale flat owners are now simply willing to wait, if they can, or rent out their HDB flats. This in turn keeps rental supply high, but that also means they will be likely to compete with private property rentals. As the supply of tenants are kept stable, this could also mean there will be a price-war in the rental market.

How long will the resale market remain weak? Will it be a tough uphill climb?