Higher success rates with HDB priority schemes

More BTO (build-to-order) HDB flat applicants have been successful in securing their units of choice at recent HDB sales launches. Under the Parenthood priority scheme, the number of married parents applying for a unit have dropped from 10,000 to 8,000 last year.

BuangkokParkVista_HDBWhat could this mean for the resale HDB flat market? As property prices drop, more HDB flat buyers may widen their options here, instead of heading straight for the new HDB flats. Some may have location considerations, especially if they have elderly parents or young children preparing to enter specific primary or secondary schools.

In 2013, 26, 494 new HDB flats were released.  But as the supply of BTO flats decrease, dropping to 16, 900 this year, and as most first-time HDB flat applicants successfully receive their flats in time for family-planning; the number of applications under these priority schemes look set to fall as well. Many of these new flats could be in non-mature estates. But as mature estates reach a saturation and before these non-mature estates reach maturation, will resale HDB flats  and private properties be the way to fill in the gaps for buyers looking to live nearer their workplaces, elderly parents or children’s schools? Will temporary rental of condominium apartments or even HDB flats be a stop-gap for this group of home seekers; and will that be an opportunity for investors and landlords of properties near schools and MRT stations?

Applying for a HDB loan – Do it early

If you’ve been waiting for ages to qualify and apply for a HDB flat, the housing development board has advised against last minute loan applications.

Not only does the process help you get a firm grip on your finances, it also helps give you a better idea of how to plan for the future. A HDB loan eligibility letter will tell you how much you are able to loan from the Housing Development Board (HDB) should that option be your mortgage financier of choice. Some buyers may opt for a bank loan instead.

MacPhersonSpring_HDB

Photo credit: HDB

But if you’re buying a BTO flat directly from HDB, they will require a HDB loan eligibility letter when booking a flat. This is to prevent buyers finding themselves in a bind, unable to acquire sufficient loans after they have already booked a flat. Previously, they were only required to have the HDB loan eligibility letter when signing the Agreement for Lease which could be a number of months after booking a flat.

Though this may not affect those looking to purchase a resale HDB flat, some buyers who may original be considering a BTO flat may change tracks and also consider resale options should they qualify for a higher loan quantum. Will this then be a boost for the resale HDB flat market?

The latest BTO launch in February consists of flats, including larger 3Gen (3-generation) flats, in non-mature estates such as Bukit Batok, Housing and also the mature estates of Geylang. The new McPherson Spring flats in Geylang are situated near the MacPherson MRT station and may be the first to be booked up. For singles who are now able to purchase 2-room BTO flats directly from HDB, those in Housing may be hot property. Applications will close on Tuesday and it may be some time before the next launch in May.

Resale HDB flats – The 2015 outlook

Across the board, property prices dipped slightly last year, and it was the same in the resale HDB flat market. The last month of 2014 showed a 10 per cent fall in prices, and the Minister for National Development, Mr Khaw Boon Wan, has mentioned an estimated single-digit drop in prices this year.

SeaHorizonECResale flats in mature estates are however holding their own. Prices remained resilient mainly due to the rarity of units in these saturated estates and good locations. In non-mature estates such as Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands and Yishun; resale flat prices fell 0.9 per cent in December, while a rise of 0.2 per cent was reflected in the mature estates sales figures.

The price decline was mainly attributed to stricter mortgage servicing ratio limits and a tightening of immigration  policies. Singapore permanent residents are now required to wait 3 years before being allowed to purchase resale flats.

But it were the larger four- and five-room flats which experienced the fall more than three-room resale flats whose prices remained level. And on the higher end of the public housing spectrum, executive flats prices rose 1.8 per cent. As a rare commodity, a hybrid which crosses smoothly from public to private housing, executive condominiums are much sought after. Though the recent close launches of a few EC projects are the same time may have reduced the percentage of uptake per development.

Industry experts are expecting sales to remain low in the first 2 months of 2015, and pick up after the Lunar New Year, perhaps even a slight rebound in the later half of the year.

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.