HDB prices for resales continued to increase throughout 2022, despite concerns about affordability of housing as well as government interventions.
The biggest price and demand increases were observed in non-mature estates such as Bukit Batok Sembawang, Yishun, Woodlands as well as Jurong West, says Christine Sun who is senior vice-president of data and analysis of OrangeTee & Tie.
“There were buyers searching for affordable apartments within non-mature estates. Even though the costs for apartments in this area have gone up however, they are still cheaper when compared with resales of flats in mature estates” she adds.
An increasing acceptance of hybrid work arrangements due to the pandemic has meant that more workers are working at home remotely, according to Nicholas Mak, head of research and consulting of ERA Realty.
“As this is the case, some homeowners may want larger apartments, but the total availability of five-room flats on the market is still extremely low,” says Mak. At present, the government will not be offering 5 room BTO flats in estates that are mature Mak adds. “Hence those looking to purchase a five-room apartment in an older estate may look to the resale market, even if the prices are more expensive.”
BTO timelines delay buyers
The rise in resales of HDB prices in 2018 was also fueled by a surge in the demand of buyers who were dissuaded by the lengthy timelines for completion of projects for certain BTO projects.
Based on Ismail Gafoor, CEO of PropNex Realty, most first-time homeowners usually attempt to buy an BTO flat because they are subventioned. “The demand for BTO flats is generally hard and new flats can take between three and five years to finish,” Gafoor says.
That means only those with a compelling requirement for housing will keep applying for BTO flats to be their first home, according to Gafoor. People who fail repeatedly to get the BTO flat could decide to look at the resale market, he suggests.
Construction supply chain problems in the industry delayed the time to complete for a small number of BTO projects between the years 2020-2021. The government claims that the majority of these timeline issues were solved and the projects were on track by the beginning of the year.
Furthermore the government also has made it a priority to highlight during the BTO sales launch this year to emphasize the speedier waiting times for certain BTO projects that are not in mature estates, according to Mak.
In the end, there are signs that the efforts of the government to lure more buyers from market BTO market are beginning to pay off, according to Sun. “As prices for resales of flats have continued to increase while the authorities have announced new BTO projects to sell and we’ve observed more people turning towards the BTO market over the last one year,”” Sun says.
The times to finish certain BTO projects in certain non-mature estates has dipped to between three and 4 years. She states. This includes BTO project located in Bukit Batok as well as Tengah.
In a unique move, HDB responded to rising concerns about housing affordability with an announcement to the media this month. The company reiterated its position that BTO project prices are set to be affordable and has an approach to pricing that differs from private developers because HDB does not impose an additional profit margin on the top of the cost associated with BTO projects.
Buyers resist COVs with high levels
This year also saw a increasing amount of flats that are resold that have a high cash-over value (COV). It is the amount that is the difference between the selling price of the flat being resold and its HDB appraisal.
As an example at the beginning of the year, some buyers were paying COVs over $600,000 for extremely desirable flats in non-mature and mature estates. “Typically high COV is noticed in flats with several buyers who are competing for them,” Gafoor says. Gafoor.
Mak says that the majority of buyers willing to pay an expensive COV are likely to be condo downgraders who have greater cash reserves to bid higher than most first-time buyers.
However, by 2H2022, resistance to prices had been established for home buyers. In a letter to Parliament in 2018 Secretary in charge of National Development Desmond Lee shared the fact that between January and October, the percentage of homes sold with COV decreased to one-in-four flats and from one in three flats being sold in 2021.
Other market watchers are also in agreement. “In all, the buyers were less likely to pay a premium COV following Sept. 2022’s property chilling measures” Sun says. Sun. She also says that a small number of buyers might also be expecting prices to drop following the latest cycle of property market restrictions.
The September regulations included increased stress-test rates on loan applicants according to Mak. The new rules will begin to restrict the amount of home loan loans that homeowners can get, and they will have to pay the remainder from their savings, Mak says.
The September legislation included the introduction of an 15-month waiting period for private property homeowners who buy a resale flat. “These buyers who downgrade tend to have more money and are able to pay more and COV for flats of their choice. If this group of potential buyers being removed from this equation, I may expect COV to fall,” says Gafoor.
Influx of flats to MOP
An all-time high of 31,325 HDB flats are expected get to their minimum occupation time (MOP) next year. In the next year 15,784 flats are anticipated to hit MOP. This is a factor in the rise in the resales flat prices particularly with the increase in million-dollar flats being sold, according to Gafoor.
“Such MOP flats typically have higher prices due to their long balance leases and the better state in the apartment. The selling of these units has helped boost prices across the property,” Gafoor adds Gafoor.
For example, in Sembawang 3962 flats will be able to attain their MOP by close of the year. Based on the data collected by PropNex 35% of five-room and four-room flats that are resold within the estate are still under leases of over 94 years.
The average price for resales of five-room apartments in Sembawang is expected to rise to $583,000 by 2022, rising 20.4% 20.4% from that of 2021 ($484,000). The prices of four-room apartments in the area have increased to $502,000 in 2022, an increase of 20.1% from that of 2021 ($418,000) Based on the PropNex study.
Record-breaking the number of flats worth a million dollars
A greater number of resales flats were sold for over $1 million in the past few years. In 2021, 259 flats sold with a minimum value of $1,000,000the highest level since 2012.
“Most million-dollar flat transactions were through mature estates. Between January 2012 and September 2022, 13 flats purchased for at minimum one million dollars in estates that were not mature. This represents 1.6% of the total 838 million-dollar transactions that were recorded during the period.” Sun says. Sun.
The 2021 record was broken in the year that followed when 342 million dollar flats sold as of the end of November. Of the 342 units that were sold three23 flats (94.4%) are in the oldest estates, according to PropNex.
Based on HDB Resale statistics collected on December 11th, the most expensive HDB sales this year were for five- and four-room and bigger flats.
As an example, the highest expensive HDB resale of the last year came for 1,313 square feet five-room apartment located at Skyterrace at Dawson. The building, Block 92, is described as a luxury apartment loft and was sold for $1.42 million ($1,080 per square foot) in July of this year.
This price beats the previous record set in the same block. It involved a fifth-floor premium loft unit that purchased to the highest bidder for $1.33 million ($1,011 per square foot) in the month of December in 2021.
The second-highest resale took place in the adjacent City Vue @ Henderson which was one of the largest units, a 1,216 square foot five-room apartment. The flat, which is located in Block 96A, was purchased at $1.4 million ($1,151 per square foot) during May.
It was followed by a resale deal within the same block , where another 5,216 square feet was purchased at $1.38 million ($1,135 per square foot) during the same month.
While, desirable units in The Pinnacle at Duxton remain to draw some of the most expensive HDB price resales. The most expensive property was a 1,151 square foot five-room house located in Block 1F. It was worth $1.39 million ($1,206 per square foot) in March.
The block also witnessed an auction of 1000 square feet, four-room apartment in the amount of $1.23 million ($1,228 per square foot) in April of this year.
The sale of million-dollar flats aren’t the sole reason for the “unsustainable price rise” within the HDB resale marketplace in 2022, claims Lee Sze Teck, senior director of research at Huttons Asia. “But they did contribute to the perception that flats were becoming expensive.”
This could have influenced the government’s intervention by imposing property cooling plans in the month of September according to Lee.
Are the million-dollar flats worth it?
The majority of the flats which have gone over $1 million are in central areas close to amenities, specifically MRT stations.
“Dawson, Henderson, and Toa Payoh are in the city fringe. Duxton is located in the middle of the city close to the CBD. The flats have easy access to facilities and are easily accessible from The MRT station. They are a great locational advantage,” ERA’s Mak.
OrangeTee’s Sun is in the same vein and adds the fact that “many apartments could include high floor units which offer great views. Certain flats are quite spacious flats, and flats with these dimensions are not available anymore from HDB”.
Additionally projects such as The Pinnacle @ Duxton as well as Skyterrace @ Dawson have become iconic HDB developments that feature appealing design, urban planning and award-winning architecture Mak says. Mak. For instance, Skyterrace @ Dawson and its architect, SCDA Architects, won the President’s Design Award in the year 2016. Skyterrace @ Dawson was described as an example for future housing for the public in Singapore.
Similar to that, The Pinnacle @ Duxton is a well-known public housing project located in Singapore. “With the combination of attractive features, it’s not surprising that these homes have price tags of millions of dollars,” says Gafoor.
The predominance of million-dollar flats in these areas could be related to the dearth of private residential developments in the area. An investigation conducted by PropNex in September of this year revealed that certain buyers could not locate comparable alternatives on the market for private residential which met their needs and budget, so they decided to buy million-dollar flats.
“Given that the location is central and the size of the unit the private condos within the same neighborhood will be significantly more expensive than million-dollar flats. In addition to the appealing physical features of the million-dollar homes We believe that the absence of affordable residential housing in these communities could be one factor which drove the interest in these flats,” Gafoor explains. Gafoor.
Conservative attitude that home buyers have
HDB prices for resales are predicted to experience a more modest growth by 2023.
“Due to the rising rates of interest, a more hefty the stress test rate for loans, economic uncertainty in 2023 and the most recent cooling measures, buyers of homes could become less cautious” says the ERA’s Mak.
He also says that if resales of flat prices keep rising and home buyers are unable to afford the price, their monthly income might not be sufficient to be sufficient for a mortgage to purchase the flats they are looking to purchase. “The expectation of further rates of interest and economic uncertainty could trigger an increased degree of caution in buyers of homes,” he says.
Gafoor claims Gafoor says that PropNex anticipates HDB price increases for resales of by 6% to 8% for 2023. That’s which is down from its prediction of 10%-10% to 2022. In the same way, Sun of OrangeTee & Tie anticipates that price growth will slow to 5-8% next year.
For the November 2022 BTO launches, HDB released 9,655 flats. The March 2023, and the May 2023 exercise are expected to release approximately 8,200 to 9,200 flats being released.
This increased supply might assist in cooling HDB flat demand for resales but it’s unlikely to drastically alter the development of the resale marketplace in 2023, according to Gafoor. “We are still expecting HDB prices for resales to show some slight gains in 2023, aided by the demand from first-time buyers who have urgent needs for housing and buyers who want to upgrade to a larger flat or move.”
Sun states that other elements tend to reduce demand for housing in the public sector like the local average unemployment rate, growth in income as well as economic growth and the global economic outlook. “For for instance, should the employment rate remains high and income growth is strong, the increasing quantity of BTO flats might not lower prices in the coming this year.” Sun believes.
In the future the future, buyers will be more careful when it comes to home purchases in light of the rising rates of interest in mortgage loan, the rise of inflation and economic headwinds, according to Gafoor. According to Mak that the property cooling measures announced in the months of December 2021 and September this year could impact the market.