Mortgage cap continues to limit resale HDB flat market

One of the more impactful property cooling measures implemented in recent years have been the Total Debt Servicing Ratio (TDSR) framework and the mortgage servicing cap for HDB flats, which limits the percentage of one’s gross income which can be used to service a loan for a HDB flat to 30 per cent.

SengkangHDB

Resale flat prices have been deflating for 2 years now and looks like it will be flatlining this year. Since its peak in April 2013, resale HDB flat prices have fallen 11 per cent and many transactions are now closed sans Cash-over-valuation (COV). The second half of last year did however see a slight increase in prices. With the selling prices of recent transactions quite transparently and clearly reflected by HDB, buyers are now more aware of the current market climate.

The number of transactions in January fell 121 units from December, and prices fell 0.5 per cent. But this may be due to the busyness which January brings for buyers and sellers and property analysts are not overly worried about the HDB market as prices and sales volume are only expected to remain level this year. The stability may be a good thing this may be the much-needed rest period before a market rebound.

 

Resale HDB flat prices stabilising

HDB resale flat prices fell a mere 1.5% last year, buoyed by a 0.2% rise in the last quarter of 2015.

Skyline Bukit Batok HDB BTO FlatPhoto credit: HDB

With the lowered prices of resale HDB flats, there may be an increase in sales volume this year as buyers have found many of these sans-COV (cash over valuation) resale units more affordable. Price-wise, property experts are looking at a 1 – 2 per cent movement, with prices staying quite stagnant this year. More young couples and upgraders may also be moving into the private property market as the total quantum prices of units have come down to a much more palatable level.

According to Minister for National Development Lawrence Wong, resale flats are mostly selling at market value, with prices comparable to that of 2011. Some of the property cooling measures which have been implemented since that which have taken effect, and which may continue to do so include the mortgage servicing cap of 30 per cent, the 25-year maximum loan tenure limit, and a 3-year waiting period for permanent residents before they are allowed to purchase resale HDB flats. Demand may also have waned as singles are now able to purchase new 2-room BTO flats directly from HDB and 18,000 new flats are to be rolled out this year with the first launch in February.

Though this may point to the market bottoming out by end of 2015, two consecutive quarters of price increase is required before a clear sign of a market rebound can be confirmed.

Resale HDB flat prices expected to stablise

It seems like 2016 could be the year when things stand still. Good for some, and a little less ideal for others. But either ways, it may be a good time for the dust to settle, for the market to finally take stock of the property cooling measures and interest rate hikes, to balance the supply and demand scale, and for the authorities to closely monitor and plan their next steps.

HDB mature estatePhoto credit: Singapore Tourism Board

Prices of resale HDB flats have stayed the same last November and December, perhaps signalling a stabilisation of the market. There was a slight 0.3 per cent and 0.1 per cent rise for 3- and 4-room flats, but a drop of 0.4 per cent for 5-room flats and ECs (executive condominiums). Flats in mature estates are still in demand, with a 0.2 per cent rise in prices, though in comparison, prices fell the same percentage in non-mature estates.

It has taken resale HDB flat prices some time to fall a narrow margin, thus a soft landing could be said to have been achieved considering last year only saw a 1.3 per cent drop in price index. Property experts are expecting prices to hold at their current level for the rest of the year despite HDB’s announcement of their intended launch of 18,000 new BTO flats this year, as the target audience for both flat types are different, with those searching within the resale HDB market most likely requiring a HDB flat in the short term. New flats typically require 3 to 6 years to build.

 

A stable year for Singapore’s property market?

Resale HDB flat prices have fallen only 1.5 per cent last year, as compared to 6 per cent the year before. Industry experts are not expecting prices to fall much more this year and in fact last quarter saw a 0.2 per cent rise in HDB resale flat price index. But that may not mean a sudden rebound of HDB flat prices as the options available to home buyers have now increased, especially as private home prices have fallen and more are now eligible to purchase new BTO flats directly from HDB.
Poiz Residences2Photo: Poiz Residences

HDB has announced that they will be rolling out up to 18,000 new flats this year, 3,000 more that last year. Private properties are now more affordable as developers have caught on to buyers’ affinity to total quantum selling prices. Last year, private property prices dropped 3.7 per cent overall, and a 0.5 per cent fall was registered last quarter of 2015.

The number of new property launches in the 4th quarter propped up new property prices with launches such as Principal Garden, The Poiz Residences and Thomson Impressions. Prices of new units in the city fringes fared well with no price changes. Landed property prices however fell 10.4 per cent over the last 2 and a half years, with prices falling 4.4 per cent last year alone.

Property analysts are watching the market closely as they are expecting the interest rate hikes to put a strain on those servicing home loans, especially as the property cooling measures concurrently remain.

Higher chances for Singles applying for new HDB flat

The year might be looking up for singles hoping to secure a new HDB flat.

Fernvale Woods HDBPhoto credit: HDB

Before July 2013, singles were only allowed to purchase HDB flats from the resale market. For two and a half years now, 2-room new BTO HDB flats have been accessible to them though the number of applicants vying for a unit have been overwhelming and the wait have been long for some.

But since the most recent launch, the number of applicants have whittled down to 7.5 per unit. When the scheme first began in 2013, there were 57.5 applicants going for a single 2-room unit. These new 2-room flexi flats are the result of merging the 2-room and studio apartment schemes, and are designed mainly for the elderly and priced to help them and families in the lower income group. Singles who earn less than $5,000 then were also allowed to apply for these flats. The income ceiling has since been raised to $6,000 mid last year.

Bidadari HDB flat Alkaff

Photo credit: HDB

Singles are however restricted to new 2-room BTO flats in non-mature estates, which means they are not eligible for the new flats in Bidadari, which is considered a mature estate. Nevertheless, this option has helped many singles own their own space, to have a bit of privacy they can call their own in this growing city. The pricing of the new 2-room flats are considerably lower than those sold in the resale market, and most of the latter are much older and may not be suitable for the needs of singles who are looking for an affordable home.

Though there will still be competition for new 2-room flats, property experts are expecting the number to fall to a comfortable 4 or 5 applicants per unit.

 

2016 – Property cooling measures to stay

Remember those days of astounding COV (cash-over-valuation) prices? Those days may be but a shadow of the current market environment today. More than half of resale HDB flats sold now are selling at prices close to market value and prices are now comparable to those of 2011.

Tampines HDB flatPhoto: Resale HDB flat for sale in Tampines.

National Development Minister Lawrence Wong has however said that it may be too early to lift the property curbs, most of which were implemented in 2013, during the peak of the property market. Since then, HDB resale flat prices have fallen about 10 per cent, according to the HDB resale price index.

Some of the most impactful measures include the Additional Buyers’ Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR) framework. For HDB loans, the mortgage servicing ratio was tightened to 30 per cent of the loan applicant’s gross income.

With the property cooling measures here to stay, this year’s resale flat prices may remain level, with some fluctuations should there be economic or interest rate changes. HDB’s announcement of their expected 18,000 new BTO units this year may dilute demand for resale HDB flats, though prices are not expected to fall much as most buyers will be those who do not wish to or are unable to wait 3 to 4 years for the new BTO flats to be built. The motivating factors for selling or buying a resale unit may be what lays the foundation for the final transacted price.

2016’s BTO flat supply to benefit first-timers

First-time HDB applicants will be the main group to benefit from this year’s ramped-up BTO (build-to-order) supply, according to the new National Development Minister, Lawrence Wong.

Punggol HDB EstatePhoto: Punggol HDB estate

The Housing Development Board (HDB) will be rolling out 18,000 new units over the course of the year, almost 3,000 more than last year’s 15,100 units. Last November’s mega-launch released 12,000 new flats in popular estates such as Bidadari to the public’s overwhelming response. Though the number of new BTO flats reaching completion within these 2 years will increase, 26,000 new flats were completed last year, the authorities maintain their stance in providing a balanced and stable supply of homes for Singaporeans.

With new priority schemes and higher income ceilings in place after last year’s elections, more first-time applicants have been successful in securing a unit within a shorter time frame. From 2011 to 2013, HDB had ramped up their supply and construction of BTO flats to meet the pent-up demand from the decade before.

Last year, the number of flats launched was reduced from 16,900 to 15,100 as the resale HDB flat market slowly stabilised. Those hoping to apply for a new BTO flat directly from HDB will be happy to hear of the increase in supply which will be spread out over various flat types and HDB estates.

Local developers setting sights on Overseas property market

Since the implementation of the property cooling measures and a recently dampened local property market, some developers are moving to developing overseas properties in cities where economic growth and demand for certain types of properties provide fodder for potential yields.

London FlatPhoto: Flat in London

Spotting opportunities in countries such as Britain and China, these overseas properties developed by local developers give overseas and local investors alike more investment opportunities and options. China has been experiencing some signs of economic stress with the oversupply of properties, leaving some ‘ghost towns’ in her midst. But in major cities such as Shanghai, where commerce and the international community is strong, the demand for properties remain high. Especially after the government lifted their restrictions on loans and relaxed the rules on foreign purchases, interest and buying activity has increased.

In the city of London and her South Eastern suburbs, prospects remain positive. City Development Limited (CDL) is one of the developers concentrating their efforts on larger projects. They are doing the same in Tokyo despite the seemingly slower economy in Japan, and are hopeful that economic measures taken by the Japanese government will give the real estate sector a boost.

The Brownstone ECPhoto: The Brownstone EC in Sembawang

Locally, the executive condominium (EC) market has had varied results as not all launches were equally well received. The Brownstone EC in Sembawang has sold 289 out of its 638 units thus far, but The Criterion in Yishun has only sold 45 out of its 505 units. Both properties are developed by CDL. With more resale private residential options and new and resale HDB flats available in the market, buyers now have more choices on their platter, and may be taking a longer time to shop for a unit.