HDB upgraders are fuelling mass-market condominium sales

Singapore

PRIVATE non-landed homes in the outside central region (OCR) continued to be popular with owner-occupiers upgrading from Housing and Development Board (HDB) flats.

Robust deal volumes and prices of HDB resale flats islandwide helped spur condominium sales in the suburban areas, said Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore.

This comes as owners who sold their existing flats benefitted from the price appreciation and cash-over-valuation amounts, enabling them to move to private housing, he added.

HDB resale volumes and prices have been supported in part by demand from first-time homebuyers, many of whom turned to the secondary market as Build-to-Order (BTO) flats' completion dates were pushed back amid the Covid-19 pandemic.

Analysts expect the stricter curbs on arrivals from countries including India and Bangladesh to further delay the construction of BTO projects and thus prompt more homebuyers to turn to HDB resale flats.

"If Singapore's employment conditions do not change, the HDB resale market is likely to become even more active, as prospective buyers may become more aggressive in purchasing homes," Dr Lee said.

This, in turn, may benefit the OCR private housing market, which could see a further uptick in sales when the number of new Covid-19 cases in Singapore comes down and the country eases its pandemic-related restrictions, he added.

As HDB upgraders are usually price-sensitive, many prefer the OCR's more affordable private homes, Dr Lee noted.

Overall price quantums in the OCR are generally lower than in the city fringe or rest of central region (RCR) and the prime core central region (CCR), assuming the sizes of the units are the same.

The OCR is often seen as an entry point into the private residential market, PropNex chief executive Ismail Gafoor wrote in a recent commentary.

Based on the real estate agency's analysis of new sales in this region in 2019, 2020, and this January, the pricing sweet spot for mass-market condos continued to be below S$1.5 million, Mr Gafoor said.

Another reason mass-market condominiums are often snapped up by upgraders is the access to social support and education.

"If the upgraders are young families, they may need to stay near their parents for support. Additionally, uprooting to a more central location may be disruptive for the children if they are attending a school near the existing HDB flat," IREUS' Dr Lee said.

Transaction data indicated that private non-landed homes in the OCR remained the top pick of upgraders. Buyers with HDB addresses accounted for 39 per cent of purchases in the OCR during the first quarter this year, compared with 25 per cent in the RCR and 13 per cent in the CCR.

To be sure, not all buyers who stated HDB addresses are necessarily upgraders, as some could be first-time homebuyers moving out of their parents' home.

But the figures may serve as a proxy to suggest where the upgraders are buying their next homes, Dr Lee said.

PropNex's Mr Gafoor also noted that the OCR tends to account for the bulk of transactions in the market, be it in the new sale or resale segments, given the broader demand base.

Prices of non-landed private residential properties in the OCR increased by 1.1 per cent quarter on quarter for Q1 2021, a tad slower than the 1.8 per cent growth in Q4 2020, statistics released by the Urban Redevelopment Authority last month showed. The figures exclude executive condominiums, a public-private housing hybrid.

Meanwhile, HDB resale flat prices across the country climbed 3 per cent quarter on quarter in Q1 2021, even as fewer flats changed hands during the Chinese New Year lull period.

Besides the BTO construction delays, a surge in the number of flats reaching the end of their five-year minimum occupation period (MOP) also boosted resale volumes and prices.

These flats are newer and thus can potentially fetch higher prices than older flats nearby, said ERA Singapore head of research and consultancy Nicholas Mak.

In 2021 and 2022, an additional 26,000 flats and 35,300 flats respectively will complete their MOP, much higher than the annual average of 12,600 flats from 2014 to 2018, Mr Mak noted.

READ MORE:

• Allure of condo living stimulates demand for mass market homes
• In weighing HDB 'lottery effect', Singapore mulls raising subsidies, imposing clawbacks
• Higher prices, Covid-hit household income lower relative affordability of HDB resale flats in 2020
• In a Covid year, new condos' price-income ratio widens