A five-room unit at Skyterrace @ Dawson is the most expensive resale flat this year. It was sold for $1.42 million in July. (Picture: Albert Chua/The Edge Singapore)
SINGAPORE (EDGEPROP) - HDB resale prices continued to climb throughout 2022 despite housing affordability concerns and government intervention.
The most notable increases in demand and prices were recorded in non-mature estates like Bukit Batok, Sembawang, Yishun, Woodlands, and Jurong West, says Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie.
“There were buyers looking for affordable flats in non-mature estates. Although prices of flats in these areas have risen, they are still lower compared to resale flats in mature estates,” she says.
A wider acceptance of hybrid working arrangements in light of the pandemic means that more people are working remotely from home, says Nicholas Mak, head of research and consultancy at ERA Realty.
“As a result, some home buyers may prefer larger flats, but the overall supply of five-room flats in the market remains low,” says Mak. For now, the government does not intend to offer five-room BTO flats in mature estates, he adds. “Hence, those who want to buy a five-room flat in a mature estate will turn to the resale market even if prices are higher.”
The upward trajectory of resale HDB prices this year was also fuelled by a spillover in demand from buyers who were put off by the longer project completion timelines for some BTO projects.
According to Ismail Gafoor, CEO of PropNex Realty, most first-time home buyers typically attempt to get a BTO flat since these flats are highly subsidised. “The competition for BTO flats tends to be stiff and new flats may take three to five years to complete,” Gafoor says.
This means that only buyers without a pressing need for housing are likely to continue to apply for BTO flats as their first home, says Gafoor. Applicants who repeatedly fail to secure a BTO flat may decide to turn to the resale market, he adds.
Supply-chain issues in the construction industry delayed the completion times for a handful of BTO projects in 2020 and 2021. According to the government, most of these project timeline issues had been resolved and the projects were back on track by the start of this year.
Read also: BTO flats priced to ensure affordability; not profit-driven: HDB
Upcoming BTO project Tampines Greenglade being built in September. In general, most BTO projects are on track to be completed within four years. (Picture: Samuel Isaac Chua/The Edge Singapore)
In addition, the government made it a point during the BTO sales launches this year to emphasise the shorter waiting time for some BTO projects in non-mature estates, says Mak.
As a result, there are some signs that the government’s efforts to divert more home buyers back to the BTO market are starting to bear fruit, says Sun. “As prices of resale flats have continued to rise and the government has launched more BTO projects for sale, we have seen more people turn to the BTO market over the past year,” she says.
The completion times of some BTO projects in some non-mature estates have fallen to about three to four years, she adds. These include BTO projects in Bukit Batok and Tengah.
In a rare move, HDB responded to rising concerns over housing affordability in a media statement this month. It reiterated that BTO projects are priced with affordability in mind, and it adopts a pricing approach that is different from private developers’ as HDB does not tag on a profit margin on top of the costs of BTO projects.
This year also saw the rise in the number of resale flats sold with high cash-over-valuation (COV). The COV is the difference between the sale price of the resale flat and its HDB valuation.
For example, at the start of this year, some buyers were paying COV of more than $600,000 for highly desirable flats in mature and some non-mature estates. “Typically, high COV is observed for flats which have multiple buyers competing for them,” says Gafoor.
Mak adds that most of the buyers who are willing to fork out a high COV tend to be condominium downgraders with more cash on hand to outbid most first-time buyers.
By 2H2022, however, price resistance had set in among home buyers. In a reply to Parliament this year, Minister for National Development Desmond Lee shared that between January and October, the proportion of flats sold with COV fell to one in four flats, from one out of three flats sold in 2021.
Other market watchers also concur. “In general, buyers seemed less willing to pay high COV after the September 2022 property cooling measures,” says Sun. She adds that a handful of buyers may also expect prices to fall after the last round of property market curbs.
The September measures included tightened stress-test interest rates for loan applicants, says Mak. This will start to limit the size of the housing loan buyers can take out, and they have to pay the excess out of their savings, he says.
The September measures also saw the implementation of a 15-month wait-out period for private property owners buying a resale flat. “These downgraders tend to have deeper pockets and the ability to pay a higher price and COV for choice flats. With this group of would-be buyers temporarily taken out of the equation, we could see COV coming down,” says Gafoor.
A record number of 31,325 HDB flats are expected to reach their minimum occupation period (MOP) this year. Next year, 15,784 flats are expected to reach MOP. This has contributed to the increase in resale flat prices, especially with more million-dollar flats transacted, says Gafoor. (Find HDB flats for rent or sale with our Singapore HDB directory)
“Such MOP flats tend to attract higher prices, given their longer balance lease and better physical condition of the flats. The sale of such units has helped to boost the overall pricing in the estate,” adds Gafoor.
For instance, in Sembawang, 3,962 flats will attain their MOP by the end of this year. Based on data compiled by PropNex, 35% of four-room and five-room flats resold in the estate have a remaining lease of more than 94 years.
The average resale price of five-room flats in Sembawang has risen to $583,000 in 2022, up by 20.4% from that of 2021 ($484,000). Meanwhile, prices of four-room flats in the area have risen to $502,000 in 2022, up by 20.1% from that of 2021 ($418,000), based on the PropNex research.
More resale flats have been sold for more than $1 million in recent years. In 2021, a total of 259 resale flats changed hands for at least $1 million — a record high since 2012.
“Most million-dollar flat transactions came from mature estates. From January 2012 to September 2022, there were only 13 flats sold for at least $1 million in non-mature estates. This is 1.6% of the total 838 million-dollar transactions recorded within that period,” says Sun.
The 2021 record was shattered this year when 342 million-dollar flats changed hands as of end-November. Of the 342 units sold, 323 flats (94.4%) are in mature estates, according to PropNex.
Based on HDB resale data compiled on Dec 11, the most expensive HDB resale transactions this year were for four- or five-room and larger flats.
For example, the most expensive HDB resale this year was for a 1,313 sq ft five-room unit at Skyterrace @ Dawson. The unit, at Block 92, is labelled as a premium apartment loft and fetched $1.42 million ($1,080 psf) in July this year.
This sale beats the previous record high set in that block, which involved another five-room premium loft apartment that was sold for $1.33 million ($1,011 psf) in December 2021.
The second highest resale occurred at the nearby City Vue @ Henderson and involved a 1,216 sq ft, five-room unit. The flat, in Block 96A, was sold for $1.4 million ($1,151 psf) in May.
In May, a 1,216 sq ft, five-room flat at City Vue @ Henderson was sold for $1.4 million. (Picture: EdgeProp Singapore)
This followed a resale transaction within the same block where another 1,216 sq ft five-room was sold for $1.38 million ($1,135 psf) in the same month.
Meanwhile, choice units at The Pinnacle @ Duxton continue to attract some of the highest HDB resale prices. This year, the most expensive unit was a 1,151 sq ft, five-room unit in Block 1F that fetched $1.39 million ($1,206 psf) in March.
This block also saw the sale of a 1,000 sq ft, four-room unit for $1.23 million ($1,228 psf) in April this year.
The sales of million-dollar flats are not solely responsible for the “unsustainable price growth” in the HDB resale market in 2022, says Lee Sze Teck, senior director of research, Huttons Asia. “But they contributed to the impression that flats were getting unaffordable.”
This may have contributed to the government stepping in with property cooling measures in September, adds Lee.
Most of the resale flats that have crossed $1 million are located in the central areas, near amenities, particularly MRT stations.
“Dawson, Henderson, and Toa Payoh are in the city fringe, while Duxton is the heart of the city near the CBD. [The flats] have convenient access to amenities and are within easy reach of the MRT station. These are strong locational attributes,” ERA’s Mak.
OrangeTee’s Sun shares a similar sentiment, adding that “many of these flats may also be high-floor units that command good views. Some of these flats are very large, and flats of these sizes are no longer offered by HDB”.
At the same time, projects like The Pinnacle @ Duxton and Skyterrace @ Dawson are landmark HDB developments with attractive design, urban planning, and award-winning architecture, says Mak. For example, Skyterrace @ Dawson and its architect, SCDA Architects, won the President’s Design Award in 2016. The development was said to be an exemplar for future public housing in Singapore.
Choice units at The Pinnacle @ Duxton continue to attract some of the highest HDB resale prices. (Picture: Samuel Isaac Chua/The Edge Singapore)
Similarly, The Pinnacle @ Duxton is an iconic public housing development in Singapore. “With a combination of appealing attributes, it is unsurprising that these flats command million-dollar price tags,” says Gafoor.
The prevalence of million-dollar flats in these areas may also be correlated to the lack of new private residential projects in the vicinity. A study conducted by PropNex in September this year found that some buyers were unable to find comparable alternatives in the private residential market that met their needs and budget, and thus went for the million-dollar flats.
“Given the central location and unit size, a private condo in the same area would be priced significantly higher than the million-dollar flats. Therefore, apart from the appealing physical attributes of million-dollar flats, we think the lack of affordable private residential supply in these estates could be a con[1]tributing factor that drove demand for these flats,” says Gafoor.
HDB resale prices are expected to see a more muted growth in 2023.
“Due to rising interest rates and higher stress test rate for loans, economic uncertainties in 2023, and the latest cooling measures, home buyers may become more cautious,” says ERA’s Mak.
He adds that if resale flat prices continue to escalate, some home buyers’ monthly income may not meet the stringent requirements to take a housing loan for the flats that they want to buy. “The expectations of future interest rate hikes and economic uncertainties may incite a more conservative mindset among home buyers,” he says.
Gafoor says that PropNex expects HDB resale prices to grow 6%–8% in 2023, down from its forecast of 9%–10% for 2022. Similarly, Sun of OrangeTee & Tie expects price growth to moderate at 5%–8% next year.
For its November 2022 BTO sales launch, HDB released 9,655 flats. The upcoming February 2023 and May 2023 sales exercises are expected to see between 8,200 and 9,200 flats released.
Artist’s impression of Kallang Horizon, which was launched as part of the November BTO sales exercise. It is also a Prime Location Public Housing development. (Picture: HDB)
This ramped-up supply may help to cool HDB resale flat demand slightly, but it is unlikely to significantly alter the growth trajectory of the resale market in 2023, says Gafoor. “We still anticipate HDB resale prices to see some modest upside in 2023 — supported by demand from first-timers with urgent housing needs and buyers looking to upgrade to a bigger flat or relocate.”
Sun says that other factors are more likely to moderate public housing demand, such as the overall local employment rate, income growth, economic growth, and the global economic condition. “For instance, if employment remains strong and income growth remains robust, the increased supply of BTO flats may not bring prices down next year,” she reckons.
Looking ahead, buyers are likely to be more prudent in their housing purchases amidst rising interest rates for mortgage loans, inflation, and economic headwinds, says Gafoor. According to Mak, the property cooling measures introduced in December 2021 and September this year will weigh on the market.
Check out the latest listings near Bukit Batok, Sembawang, Yishun, Woodlands, Jurong West, Skyterrace @ Dawson, City Vue @ Henderson, The Pinnacle @ Duxton