Government agencies should step up communications on outlier property transactions

MANY Singapore residents track the housing market here closely and have views on where the market is heading. This is unsurprising given the high homeownership rate among residents.

People can access loads of data from the Housing and Development Board (HDB) and the Urban Redevelopment Authority (URA), as well as reports by property consultants and the media to help them analyse the housing market.

Still, what often captures people’s imagination are outliers in property transactions. Think of a home in a Good Class Bungalow Area that sells for over S$80 million, or leases out for more than S$120,000 a month. Or a condominium unit that fetches over S$5,000 per square foot (psf). Or an HDB resale flat that transacts for S$1.5 million.

The rental of a three-room HDB flat in Bukit Merah at S$8,000 a month that The Business Times reported on recently created much buzz. The anomalous figure, which turned up in data on rentals signed, was a “mistake”. In response to queries from BT, HDB said in late September: “Upon further checks, the owner clarified that a typographical mistake was made in the application form, listing a rental rate of S$8,000 per month for the entire flat, instead of S$900 per month for a single bedroom rental, as intended.”

Should the HDB have acted faster to correct the information on the rental deal? What impression has the mistakenly reported deal left on market participants?

In the case of the above transaction, the outlier turned out to be a “mistake”. However, in a market with many transactions, there have been and will continue to be actual outlier transactions that make the headlines.

Reasons for outlier deals

Various reasons explain the existence of outlier transactions. It is possible that a party pays above the market rate for a particular unit because of the unit number or a unique view. A buyer may pay a premium for an HDB home with scarcity value such as a corner landed unit or an extra spacious flat.

A family may have wanted to urgently close a deal in a development where there are scant choices of homes available for sale to secure a home that is close to a particular primary school. 

A wealthy foreigner might splurge on renting a landed detached house or a penthouse in a prime district while waiting to become a permanent resident (PR). Tax payable when buying a first home as a PR is much lower than when purchasing as a non-PR foreigner.

And a landed home of exceptional architectural merit, which uses top-class materials and has high-end fittings, could sell for much more than other houses nearby. 

The extra prestige associated with a Nassim Road address may help justify the S$308 million asking price, which works out to about S$5,240 psf, based on the total land area of 58,784 square feet, for a Nassim Road bungalow put up for sale by Hong Fok Corporation’s joint chief executive officer Cheong Pin Chuan and his wife.

Outliers as marketing points

There were 35,251 property agents in Singapore at the start of 2024 according to data from the Council for Estate Agencies.  

Sure, strict rules govern how agents behave. Still, some agents may try to put as positive a spin on the housing market as possible, and use outlier transactions as marketing points.

After all, agents compete fiercely to secure listings and close deals. They often incur high marketing costs and get remunerated only upon closing a deal.

Both HDB and URA share plenty of housing market data. Nonetheless, given the persuasive power of outlier transactions, government bodies should consider being proactive in highlighting and commenting on outlier transactions.

For example, without breaching the confidentiality of the parties involved, HDB could, based on its understanding, take the initiative to provide the context to why a particular resale unit fetched an eye-popping price.

Recently, the press reported that the first HDB flats from the Bidadari housing estate have hit the resale market.

For example, four-room flats sold for close to or over S$1 million each.  

Four-room flats in Alkaff Vista in Bidadari were priced between S$433,000 and S$550,000 when they were launched in 2015. 

Many Build-To-Order (BTO) buyers of the flats that have recently fulfilled their five-year minimum occupation period (MOP) may be enjoying a return of over 100 per cent on their BTO homes upon the flats reaching MOP.

The government has, when questions come up in Parliament or after record-breaking deals are reported, been consistently saying that exceptionally high-priced resale flats are few and far between. It has also pointed out that the surfacing of such deals fuels a “psychological factor” in buying impetus.

However, HDB may need to actively communicate that the experience of Bidadari BTO homebuyers, for instance, is an exception.

What helped to drive the gains of these homeowners was the post-Covid pandemic surge in the HDB resale price index of 12.7 per cent in 2021 and 10.4 per cent in 2022.

Perhaps a lower annual increase in HDB resale prices such as the 4.9 per cent in 2023 better represents the likely pace of resale price escalation going forward. 

Also, a person applying today for an HDB BTO home in a project with attributes such as Alkaff Vista could find the project classified as Plus under HDB’s new classification of BTO projects as Standard, Plus and Prime.

Plus flats will come with a longer 10-year MOP, subsidy recovery upon resale of a flat, as well as various tighter resale and rental restrictions versus Standard flats.

Record-breaking transactions whether of homes or other property types may sow panic among potential buyers or renters.

Might reports of high rents fetched by certain office spaces and homes scare businesses from setting up a presence here?

Could a record price for a residential property transaction or high hotel room rates during super-peak dates create an impression that Singapore is very expensive?

Access to data

Certainly, providing easy access to high-quality information will help educate people on the property market. As homebuyers in general are increasingly better educated and more tech-savvy, access to data can enable more buyers to stay well-informed.  

Still, government agencies should be on the front foot in proactively providing context to outlier property deals for the benefit of consumers and ultimately market stability.