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13 May

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?

6 May

No quick-fix to managing HDB flat prices

So says National Development Minister Khaw Boon Wan.

Ever since the Government announced that new HDB flats will come at a lower price, HDB flat owners have been expressing fears of losing their nest egg should prices of flats drop. But as new flats are limited to only certain groups and limited in terms of type and location, will there necessarily be a drastic drop in resale flat prices and are we worrying too early? Though the number of resale flat transactions have decreased, prices continue to remain high. And there will always be those who wish to choose a flat of their liking in a location they prefer, as opposed to trying perhaps numerous times in the HDB ballot queue.

HDB Flats THinkStockMr Khaw reassured Singaporeans that while prices of HDB flat will only drop “a few per cent over the next few years”, but in the same breath said that the prices of HDB flats cannot keep rising forever. “If housing prices keep rising,it won’t be good. When I came into the MND (Ministry of National Development) two years ago, that was my target”. And much has been done since then, with the ramp up of BTO flat supply, changes in income ceiling, limits on HDB flat sizes, increase in number of allocated flats for both first and second-timers, and even allowing singles to buy new HDB flats.

During the recent Our Singapore Conversation (OSC) dialogue, the idea of selling back new flats only to the Housing Board was faced with much opposition. Homeowners naturally worry that their homes will lose  their value and cut them off from the profit they can earn by selling it in the open market. Mr Khaw admits that resale flat prices are difficult to manage as they are largely subjected to the market demand. SLP International executive director Nicholas Mak speculates that one way of gently letting resale HDB flat prices drop is to decrease the prices of new HDB flats in the same estate.

Forestville Executive Condominium.

Forestville Executive Condominium.

Recent debate also surround the Executive Condominium (EC) scheme\. While some have said that those who can afford an EC should not receive subsidies from the Government, the scheme was specifically initiated to help those who may not qualify for other HDB subsidy schemes. Thus should ECs still be considered a value-added profit-making asset for their owners?

20 Mar

Do singles like their new HDB Option?

This would be the option of  being able to buy new flats directly from HDB. This scheme is likely to begin in July this year and some are already getting ready to jump in the queue. Others however are skeptical of the size and location constraints, and also the 2 to 3-year wait before getting your keys to the flat.

Oleander Breeze BTO Flat in Yishun.

Oleander Breeze BTO Flat in Yishun.

This may impact the resale HDB flat market somewhat, but perhaps mainly the three-room resale flats. Singles make up a good 15% of the resale flay purchases, but they usually go for smaller units and thus the bigger units could still be tagging themselves to high valuation plus cash-over-valuation figures months down the road.

For the moment, singles earning $5000 and below per month (that is the other catch in the new rulings allowing singles to purchase new HDB flats) only really have two options – a three-room resale flat or a shoebox apartment. Many who bought shoebox apartments were usually investors rather than owner-occupiers. Some may also be willing to fork out for a resale flat to put a roof over their heads immediately rather than wait out the few years it takes between getting your flat on paper and literally having the keys in your hand. Build-to-order (BTO) flats usually take about 2 to 3 years to build.

Without a shared household income, singles are also largely affected by age and income spectrum when it comes to the loan amount they are able to apply for. For example a single above the age of 40 though earning $5,000 will only be able to get a loan of $255, 000 to $300,000 as compared to a single aged 35 and earning $4,000 a month who will be able to get a loan of $265, 000 to $310,000. In a flash, this puts limitations on the type of property and location of the property singles are able to purchase.

So how will the resale HDB flat market really fare following this change? Will prices of resale flats drop even further or will owners simply continue to hold on to their property indefinitely, whilst waiting for major shifts in the private property market to trickle down?

11 Mar

Singles will be allowed to buy new HDB Flats by July

This rang clear in the National Development Khaw Boon Wan’s message last Friday. And many are already cheering.

Currently singles above the age of 35 are allowed to buy HDB flats, but only from the resale market.

Currently singles above the age of 35 are allowed to buy HDB flats, but only from the resale market.

There are caveats however.

  • The age limit for singles buying flats has not changed, resale or new, you have to be 35 years of age before you can buy a public housing unit.
  • Singles can only buy 2-room flats . These flats are either 375 or 485 sq ft in size. This is just slightly smaller than some studio apartments or shoebox apartments in private condominiums.
  • There is an income cap at $5000.
2-room Bukit Batok HDB flat for sale.

2-room Bukit Batok HDB flat for sale.

A new 2-room HDB flat in Punggol went for around $100,000 last year, and that was before available grants kicked in. Currently singles can apply for a $15, 000 HDB grant if they earn $5000 or less. Mr Khaw has said that they recognise that those earning under $5000 a month will face difficulties owning a home in Singapore.

Part of the reason behind pushing out this new ruling by July this year is that the increased supply of new HDB flats have cleared “a backlog of applications from married couples seeking a Housing Board home for the first time”.

Is this new move a response to Prime MInister Lee Hsien Loong’s National Day Rally speech last year, where he acknowledged that singles have housing needs too?  Are these restrictions fair and what are the possible loopholes? Will this cause a drop of resale HDB flat prices and how will that change the landscape of this market?

21 Feb

Will $1 million dollar HDB Flats become the norm?

While Singaporeans try to live with rising inflation, and the Government attempts to cool the property market multiple times, the peculiar case of rising public housing costs continues to rise its head in the sea of rising private property prices.

Perhaps this does not happen in many other countries, where most of  the time public housing is often put aside for the lower income groups or those on welfare, but in Singapore, public housing is a commodity and an investment tool. And it could be this concept which gave rise to continuously rising HDB flat prices.

Woodlands-Executive-Maisonette.jpg

According to data from the Singapore Real Estate Exchange (SRX):
In 2011, there was only 1 case of a HDB flat selling for more than $900,000.
In 2012, there were 18.
In 2013, in January and February alone, there were 18.

The trend is obvious and there seems to be no sign of doing a U-turn. Property analysts say these are usually units which provide value for money in comparision to private properties in the same area. Usually the larger units, its not longer the older resale flats in mature estates which are commanding such prices, even newer flats pricing themselves in the same range.

Bishan Shunfu HDB

In January this year, a 1, 750 sq ft executive maisonette in Bishan was sold for $1.01 million, beating the record of a $1 million Queenstown executive apartment. A 5-year Jalan Membina 1,180 sq ft 5-room flat is seen to be priced at $925,000.

With even more units from choice locations coming into the market in 2 years’ time, such as those at Pinnacle@Duxton, industry experts are expecting the number of $1 million resale HDB flats to go up. Will $1 million be the new property baseline? Will the National Development Minister‘s promise to unpeg new HDB flat prices from resale flat prices truly benefit? And who will benefit? Does this really take care of those who can neither afford resale HDB flats nor private properties and yet do not qualify to purchase new flats?

5 Feb

HDB flat prices – New versus Resale

Do prices of BTO HDB flats rise in parallel to resale units? No, says the Singapore Government.

In line with their aim to keep new flat prices affordable for first-time buyers, National Development Minister, Khaw Boon Wan, has emphasized that BTO flat prices are in no way linked to the market prices of resale HDB flats.

Tampines Court BTO HDB flats, part of HDB's latest January 2013 launch. Photo by HDB.

Tampines Court BTO HDB flats, part of HDB’s latest January 2013 launch. Photo by HDB.

Addressing concerns that BTO prices may be dancing hand-in-hand with resale HDB flats, which have been on the rise for the past few quarters, Mr. Khaw promises to provide abundant and affordable housing to match the projected 6.9 million population of 2030. He says that as long as ‘property remains hot’, the new pricing policy of de-linking BTO flats to resale HDB flats will continue. It looks like this policy may have to stay for quite some time yet, as market feedback shows that prices are still going strong and have barely shown signs of letting up.
Industry players are not expecting the new HDB flats to take too much away from the resale flat market. SLP International’s head of research Nicholas Mak says that low prices of new flats may ‘effectively slow down the resale market but will not stop or reverse rising trends yet’.  However, Mr. Khaw did mention that although BTO prices will be priced differently from resale flats, there will be differences within its own category. He says HDB will not be pricing its new flats ‘haphazardly’ but instead, buyers can expect prices of BTO flats in mature estates to be up to 40 per cent more than those in outlying suburbs.

This keeping of prices low does come at a price. Taxpayers are essentially paying for the gap between new flats and resale flats. Because HDB purchases land from SLA (the Singapore Land Authority), land prices are based on the prices of resale flats in the vicinity, thus if resale flat prices are rising, land is more expensive, but if new flat prices are still kept low, the amount difference is made up by government subsidies, which indirectly comes from the taxpayers’ coffers.

31 Jan

3,300 new HDB Flats in January’s sales launch

Young married couples with children will get priority in the latest round of sales launch of new BTO HDB flats. These new flats are available in both mature and non-mature estates, namely Ang Mo Kio, Yishun, Tampines, Choa Chu Kang, Hougang and Kallang-Whampoa.

New BTO flats in both mature and non-mature estates in HDB's January 2013 launch.

New BTO flats in both mature and non-mature estates in HDB’s January 2013 launch.

New flats in mature HDB towns will cost more than those in non-mature estates. Yes, even fresh ones from HDB. But at $575,000 for a five-room flat in Ang Mo Kio, it is still considerably lesser than a similar one in the resale market which goes for as much as $628, 000. Units from the sales launch which are not taken up, will then be release to first-timers. First-timers can get up to $60,000 in grants. Prices start from $140, 000 for a 700 sq ft, three-room unit in Cho Chu Kang.

Photo from HDB.

Kebun Baru Court HDB flats in Ang Mo Kio. Photo from HDB.

Analysts are expecting an increase of bids from young families, but Dennis Wee Group spokesman Lee Sze Teck thinks otherwise. He thinks that most married couples who were looking for new living arrangements may have already done so by now, especially if they have children below 16 years. And if they haven’t, it could be that they are comfortable with their current situation thus may not be that eager to go for a new HDB flat. But still, response may be as heated as before, simply because the resale market is rising to unreachable heights.

The next launch of 3,980 BTO flats will be in March with units in Bukit Batok, Punggol and Sengkang.

30 Jan

Steep rise in Resale HDB Flat COV

The storm that brewed in the public housing market last quarter came in the form of COV prices. Rising from $45, 000 to as much as $67,800 in popular mature estates such as Toa Payoh and Tampines, January’s cooling measures may just have been the breakwater to calm the waves. The cooling measures have only just been implemented, and the first three weeks of 2013 saw steady median COVs and demand for resale HDB flats.

Mirage new HDB BTO Flats in Choa Chu Kang.

Mirage new HDB BTO Flats in Choa Chu Kang.

Whether these price waves will crash and subside or overtake the cooling measures, may be dependent on the supply of flats as well as whether there are changes in the eligibility of singles in applying for new HDB flats. Although National Development Minister Khaw Boon Wan has mentioned that this year may be the year rules change, it still awaits implementation.

The lack of supply of resale HDB flats is also partly due to the fact that most HDB owners see their flats as a good source of rental income, and as long as that option is open, and the rental demand is high, they may be unwilling to forego their HDB flats, thus decreasing the number of available resale flats in the market.

Some reasons which may have driven buyers to look for resale HDB flats:
1. They are willing to pay for a favourable location
2. They want to move into a new home quickly
3. They are looking to upgrade within the public housing category to a bigger space

On the other side of the coin, industry analysts have brought up the point that demand for resale HDB flats are driven largely by those who are ineligible to purchase new HDB flats, mainly permanent residents (PRs) and singles. Does this mean then that these groups of buyers are actually able to afford resale HDB flats and thus there may not be a need to change things around and allow them to purchase new HDB flats? Or will a change of rulings mean lesser HDB flat owners may now benefit from the rise in value of the properties over the years? Will this largely decrease the potential pool of buyers of resale HDB flats or will the demand continue to be present, perhaps minus COV (cash-over-valuation)?

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