ANALYSIS: The increasing appeal of four-room HDB flats

By Elizabeth Choong

/ EdgeProp Singapore |

February 19, 2024 10:21 AM SGT

The average unit price of four-room HDB flats in Pasir Ris has been trending below their three-room counterparts. (Photo: Albert Chua/EdgeProp Singapore)

SINGAPORE (EDGEPROP) - According to the HDB’s latest annual report, there were 1,117,397 flats under their management that housed 3,177,380 residents as of March 31, 2023. The flats comprise 1,052,962 sold flats (or 94.2% of the total HDB stock) and 64,435 rental flats.

Among the sold flats, there were 443,285 four-room flats, accounting for 42.1% of the total sold stock, followed by 251,762 five-room flats (23.9%) and 246,606 three-room flats (23.4%). One-room flats, two-room flats, studio apartments, and executive flats make up the remaining 10.6%. It is notable that four-room flats have consistently accounted for the bulk of HDB flats.

In this article, we examine the reasons for the persistent popularity of four-room flats and the HDB towns that offer the most value for such flats.

Read also: Pasir Ris Mall opens with 150 retail offerings

Average price for four-room flats is rising at the fastest pace

Four-room flats also exhibited the highest price growth of 32% from 2014 to last year. Price growth for three-room and five-room flats was 21% and 29%, respectively. Likewise, four-room flats showed the highest year-on-year price growth. From 2022 to last year. The average price for four-room flats increased by 6.1%, while the average prices for three-room (5.6%) and five-room flats (4.4%) grew at a slower pace.

Since 2018, the average price for four-room flats has outpaced the average prices for three and five-room flats. Last year, the average price for four-room flats was $574 psf, higher than three-room ($562 psf) and five-room flats ($543 psf).

Source: EdgeProp Market Trends (as at 15 February 2024)

Why are four-room flats so popular with homebuyers?

Despite having the highest average price that is also rising at the fastest pace, four-room flats are the most transacted flat type, accounting for 43% to 48% of total resale transactions for three-room to five-room flats from 2014 to last year. Last year, 11,449 four-room flats were sold in the resale market, significantly more than three-room (6,416 flats) and five-room flats (5,891 flats).

Source: EdgeProp Market Trends (as at 15 February 2024)

The typical floor layout for four-room flats works to their advantage. A typical three-room flat has only two bedrooms, while four-room and five-room flats have three bedrooms. The main difference between four-room and five-room flats is that five-room flats have a bigger living/dining area, and some five-room flats have a balcony.

The number of bedrooms in a typical four-room flat fits the space requirements of a typical family in Singapore, which is likely to comprise a couple with one or two children. The smaller size of a four-room flat is also likely to make it more affordable than a five-room flat.

Based on the flats offered for application during the recent Build-To-Order exercise in December last year, three-room flats are 66 to 70 sq m (710 to 753 sq ft), four-room flats are 89 to 94 sq m (958 to 1,012 sq ft), and five-room flats are 113 sq m (1,216 sq ft).

As such, the average size difference between four-room and five-room flats is approximately 200 sq ft compared to the larger size difference of approximately 300 sq ft between three-room and four-room flats. The higher price and minimal increase in space are likely to dissuade buyers from purchasing a five-room flat and encourage them to purchase a four-room flat instead. Furthermore, buyers of four-room flats have more options because they comprise the majority of the HDB stock.

Another reason for the popularity of four-room flats is the shrinking household size. Smaller households are likely to require less space and hence favour a smaller house. The overall average household size for Singapore shrank from 3.4 persons in 2014 to 3.1 persons last year.

The decline in average household size is even more obvious for those residing in HDB flats. The average household sizes for residents dwelling in HDB flats and condos were 3.4 persons in 2014. Last year, the household size declined to 3.2 persons for those living in condos but dropped to 3.0 persons for HDB dwellers.

Lastly, four-room flats likely benefited from a government regulation that took effect in September 2022. Owners who sold their private residential property will have to wait 15 months before they can purchase a resale HDB flat. However, the wait time is reduced to six months for seniors aged 55 years and above who plan to purchase a four-room flat or smaller.

Price of three-room flats in Pasir Ris is given a boost by limited stock

Among all HDB towns, the price gap between three-room and four-room flats in Pasir Ris favours upgraders the most. In contrast, upgraders should avoid Central Area, Queenstown and Toa Payoh.

From 2021 to last year, the average price for four-room flats in Pasir Ris was lower than their three-room counterparts by at least $163 psf. This means that owners can expect to receive a higher unit price when they sell their three-room flats in Pasir Ris and pay a lower unit price when they purchase a four-room flat in the same town.

This could be attributed to the lack of three-room flats in Pasir Ris. As of end-March last year, the town had only 490 three-room flats but had 11,641 four-room flats. Among all HDB towns, Pasir Ris had the least number of three-room flats after Bukit Timah, which had only 439 three-room flats. As such, owners of three-room flats in Pasir Ris have significant bargaining power when selling their flat.

The limited number of three-room flats in Pasir Ris could also explain its strong price growth of 65% from 2014 to last year. In contrast, four-room flats grew only 37% over the same timeframe. Due to the slower price growth, the average price for four-room flats in Pasir Ris was $517 psf last year, significantly lower than the average price of $680 psf for three-room flats.

Source: EdgeProp Market Trends (as at 15 February 2024)

In contrast, the price differences between three-room and four-room flats in the Central Area, Queenstown, and Toa Payoh are the least favourable to buyers who plan to upgrade from three-room to four-room flats. From 2021 to last year, four-room flats in these three towns had significantly higher unit prices compared to three-room flats.

The price gap is particularly wide for Central Area, where four-room flats were more expensive than their three-room counterparts by $263 psf last year. The price gap was $254 psf in Queenstown and $186 psf in Toa Payoh.

This could be because the three towns have significantly more three-room than four-room flats, which reduces the bargaining power for sellers of three-room flats.

Avoid Queenstown and Bukit Merah when right-sizing from five-room to four-room

The average unit prices for four-room flats in Queenstown and Bukit Merah have been higher than their five-room counterparts for the past three years, which does not favour owners who plan to right-size from five-room to four-room flats.

The average price for four-room flats in Bukit Merah has consistently trended above their five-room counterparts. Furthermore, the average price for four-room flats (26%) has grown at a slightly faster pace than five-room flats (23%) from 2014 to last year. This is despite Bukit Merah having more four-room than five-room flats. Bukit Merah had 17,191 four-room and 9,621 five-room flats as of the end of March last year.

Source: EdgeProp Market Trends (as at 15 February 2024)

The difference in price growth is more obvious in Queenstown. From 2014 to last year, the average price for four-room flats in Queenstown grew by 27%, significantly faster than five-room flats (14%) in the same town. Queenstown also had more four-room than five-room flats as of the end of March last year. The town had 10,462 four-room flats and only 4,338 five-room flats.

Source: EdgeProp Market Trends (as at 15 February 2024)

The higher unit price of four-room flats compared to five-room flats in Queenstown and Bukit Merah means that sellers of five-room flats in the two towns will not gain much money after they purchase their replacement four-room flat in the same town.

For example, a 958-sq ft four-room flat in Bukit Merah will cost $768,316 based on the average price of $802 psf last year. A 1,216-sq ft five-room flat in the same town will cost $901,056 based on an average price of $741 psf. Last year, the average prices for four-room and five-room flats in Queenstown were $877 psf and $765 psf respectively. Hence, a four-room flat in Queenstown will cost $840,166 while a five-room flat will cost $930,240. As such, sellers of five-room flats in Bukit Merah and Queenstown can expect to gain $132,740 and $90,074 respectively after they purchase their four-room replacement flat.

In contrast, the price difference favours sellers of five-room flats in Marine Parade. Last year, four-room and five-room flats in Marine Parade fetched $610 psf and $659 psf respectively. This translates to an average of $584,380 for a four-room flat and an average of $801,344 for a five-room flat. This means that the seller of a five-room flat will gain $216,964 after purchasing a replacement four-room flat, a significantly higher gain compared to Bukit Merah and Queenstown.

Source: EdgeProp Market Trends (as at 15 February 2024)

However, the average prices for four-room and five-room flats in Marine Parade inched up by only 4% and 8% from 2014 to last year. Furthermore, there are only 1,798 four-room and 1,682 five-room flats in Marine Parade, so finding a suitable resale flat might prove challenging.

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