HDB resale market abuzz with activity

PUBLIC housing continues to be the most affordable option for both newly married couples and permanent residents (PRs) who want to set up their home in Singapore. Recently, the market has seen increased activity in the resale segment, with the highest number of transactions - 6,001- concluded in the second quarter of 2017.

This is the first time that volume has hit the 6,000 mark since Q3 2012 when there were 6,560 transactions. Since 2014, the yearly transactions have steadily increased (Chart 1). In the first half of 2017 alone, 10,531 transactions were concluded, paving the way for more than 20,000 transactions by the end of the year.

The heightened performance in this segment illustrates the trend of HDB owners choosing to upgrade laterally to bigger flats, attracted by the almost-zero cash downpayment in resale transactions. Another factor that makes resale property more affordable is the increased housing grants for first-time buyers. This is definitely a plus point for many newly married couples who prefer to stay nearer to their family in mature estates.

Nevertheless, there are also many newly married couples who will opt for Build-To-Order (BTO) flats, preferring to start afresh in a new unit. Several factors make BTO flats much more attractive than resale properties - the shortened waiting time of two and a half years, affordable price range of up to 20 to 25 per cent lower than resale properties and more chances of securing a unit through HDB sales exercises such as Sales of Balance Flats and the latest Re-offer Balance Flats which was introduced in July.

WIDENED PRICE GAP

Although prices of HDB resale properties are showing signs of consolidation, there is no indication that prices will start to pick up with high positive growth in the near future. According to the HDB Price Index (Chart 2), prices of resale properties have been continuously falling since 2013 upon the introduction of cooling measures, with minor respite in Q4 2015 when there was growth of 0.1 per cent. In the recent Q2 2017, prices fell by 0.1 per cent which was slightly better than previous quarter's performance when there was 0.5 per cent decline. Prices are expected to be muted with low growth of -1 to 2 per cent by the end of the year.

While prices are muted in the public homes segment, record benchmark prices have been set for existing private residential properties such as North Park Residences in Yishun and Le Quest, a mixed development in Bukit Batok, in 2016 and 2017 respectively.

With the aggressive land bids and current positive sentiments this year, prices for private properties, primarily for new mass market condominiums, are set to be even higher next year. Prices of future project launches are slated to increase by about 10 per cent based on the high land bids and to inch their way up from the current average of S$1,250 to S$1,400 per square foot (psf) by 2018.

ALTERNATIVE OPTIONS

While the widening price gap between resale HDB flats and new condominiums may be of concern to HDB upgraders, there are alternative options for them to consider, such as executive condominiums (ECs) and resale private properties.

A hybrid of public and private housing, ECs are specially targeted at HDB upgraders and middle-income couples with a monthly household income ceiling of S$14,000. First-time EC buyers will also be able to maximise the government grants up to S$30,000 for their purchase. ECs are fast becoming an investment choice for young married couples where unlike public housing, they can enjoy lifestyle facilities such as swimming pools and BBQ pits at a much more affordable price compared to mass market condominiums.

In July, the market witnessed a new record at an EC launch where all 531 units of Hundred Palms Residences in Yio Chu Kang Road sold out in a record time of seven hours. Unfortunately in recent times, we have not seen many government land sales (GLS) released for ECs to feed the demand of EC buyers.

The current sentiment is indeed an indication for the government to review and possibly supply more GLS for ECs. By doing so, it will put a check on the aggressive land bid prices by developers who are banking on the knowledge that many HDB upgraders will eventually opt for ECs due to the wide price gap between mass market condominiums and ECs.

Another option for HDB upgraders is resale private property. Properties in this segment are generally underpriced in the market as a majority of buyers focus their attention on new launches instead. They are lower priced in terms of per square foot and would allow an HDB upgrader to enjoy their desired lifestyle living within the affordable price range.

HDB upgraders are advised to maximise the window of opportunity in the next six months to pick up unsold existing ECs and also reasonably priced resale mass market condominiums available in the market.

For the public housing segment we predict that there will be slight price movement of about -1 to +1 per cent, with volume exceeding 22,000 units by end of 2017. Resale properties will continue to attract buyers who are drawn to the stabilising prices, coupled with the wide array of locations that they can choose from.