Many people might balk at the idea of spending a million dollars for a resale HDB flat. One reason for this is because resale flats, especially those in mature estates, tend to come with shorter leases, and not to mention potentially higher renovation costs.
Flats in older estates such as Toa Payoh or Ang Mo Kio for instance, could easily have leases with less than 70 years remaining.
Findings from our recent poll results on our Instagram account suggested the same thing, with 95% of respondents saying that they would not pay $1 million for a 5-room resale flat.
We asked and you answered: 95% of our Instagram respondents said “no” to buying a million-dollar resale flat
And yet, million-dollar HDB transactions continue to crop up and catch us by surprise. Most recently, a 5-room HDB flat in Queenstown was sold for $1.1 million in June, setting a new record for the area.
The million-dollar resale unit at Block 18C of Holland Drive is located between the 37th and 39th floors with a floor area of 1,259 sq ft. This works out to about S$874 psf on the built-up area.
A 5-room HDB flat in Queenstown was sold for $1.1 million in June
So, what’s driving these transactions? For answers, we spoke to ERA’s senior marketing director, Joyyce Goh - the seller’s agent who helped close the million-dollar deal.
1) Location
According to ERA’s Goh, location is the number one factor that is driving these million-dollar transactions. HDB units that have commanded $1 million and above are all located in the central region, she notes.
Their appeal is elevated by the fact that fewer new flats are being launched in these mature estates. Which is why, buyers are willing to pay a premium for homes in these locations, Goh says.
The Queenstown flat that fetched $1.1 million is located on Holland Drive and is less than 400m from Buona Vista MRT station. Several shopping outlets such as Anchorpoint Shopping Centre, The Star Vista and Holland Road Shopping Centre are also nearby.
This is consistent with our earlier research on million-dollar HDB hotspots, which suggested that the dramatic rise in HDB resale values are a clear indication that Singaporeans are willing to pay top dollar for homes located in central areas. In particular, homes in mature estates that are located close to MRT stations, and amenities such as schools and malls are favoured.
2) Age of the property
Another factor to consider is the property’s age, says ERA’s Goh. Built under the Selected En Bloc Redevelopment Scheme (SERS), the $1.1 million Queenstown unit has a remaining lease of 93 years. SERS was developed by the government to rejuvenate old estates and to redevelop them.
The thing about SERS projects is that they tend to be in central locations that are surrounded by a host of facilities and amenities.
Another SERS project that has seen transactions above the million-dollar mark include Clementi Towers, which is the first HDB project to be integrated with a mall and a bus interchange that is linked directly to the MRT station.
Other SERS projects that have been known for transactions above $1 million include Block 50 Commonwealth Drive in The Commonwealth and 18D Holland Drive in Holland Village.
3) Unblocked views
One of the first things that potential buyers check out when visiting a place is to take in the view from the unit. So it is no surprise that properties with great, unblocked views tend to command a higher price, says ERA’s Goh.
It is also for this reason that these million-dollar units tend to be located on higher floors, Goh adds.
“There are so many units within the same vicinity, the same development, and they tend to have the same layout. Having an unblocked view is one of the factors that make a unit stand out,” she shares.
For comparison’s sake, the $1.1 million ($874 psf) Queenstown HDB unit transacted at 15% higher psf compared to the unit below, which recently sold for $945,000 (S$751 psf).
4) Size and price
Finally, another contributing factor to the million-dollar HDB trend could also be that condo and EC sizes are shrinking. Extended families who require larger spaces for a more comfortable lifestyle would likely look at buying older but larger HDB units.
For instance, the $1.1 million sale of the 1,259 sq ft Queenstown flat worked up to about $874 psf. In comparison, resale condos of a similar size range within the Queenstown area transacted at an average of $1.58 million or $1,309 psf in the first six months of 2018. Further, these transactions took place in older developments such as The Anchorage, Le Hill Condominium and The Rochester.
It’s not just the size - the growing disparity in condo and HDB home prices have made it increasingly difficult for HDB homeowners to make the jump toward private properties.
For those with budget constraints, the surge in private home prices may push them in the direction of the HDB resale market.
“The combination of a larger space at a lower price could be a driving factor for families who do not wish to pay so much for a private property,” ERA’s Goh shares.