ANALYSIS: Which town has the narrowest price gap between private and public housing?
By Elizabeth Choong
/ EdgeProp Singapore |
Marine Parade has the largest price gap between public and private housing. (Samuel Isaac Chua/EdgeProp Singapore)
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SINGAPORE (EDGEPROP) – Resale condo prices in Singapore are rising faster than HDB flats, potentially making it harder for residents to switch from public to private housing. However, some towns have a smaller price gap between the two. This article explores the price differences in various towns to identify where it is most affordable to upgrade without leaving a familiar neighbourhood.
Overall price difference has been widening
We compared the average prices of five-room resale flats with resale leasehold and freehold condos of the same size (1,100 to 1,400 sq ft) in the whole of Singapore. We observed that the price differences between five-room HDB flats and the two types of condos have indeed widened over the years.
The resale price gap between five-room flats and leasehold condos in Singapore has increased from $222 psf in 2002 to $530 psf in 2012, before growing further to $825 psf this year. A steeper increase in the price difference was observed when comparing five-room flats and freehold condos, which rose from $314 psf in 2002 to $744 psf in 2012 and then to $1,125 psf this year.
Easier to upgrade to smaller condo units?
It is obvious that the unit price difference between a five-room flat and smaller condo units of 800 to 1,100 sq ft has grown over the years. For 99-year leasehold condos, the price gap has grown from $259 psf in 2002 to $632 psf in 2012 and $917 psf this year. The price gap is even wider for freehold condos, having grown from $392 psf in 2002 and $861 psf in 2012 to the current $1,205 psf.
However, a different picture emerges when comparisons are done on a total price basis. The price difference is actually narrower when comparing a five-room flat to smaller condo units. As such, it might be easier for owners to upgrade from public housing to private housing if they are willing to consider a smaller condo unit.
Which HDB town has the narrowest price gap?
Currently, Sembawang in the North Region has the narrowest price gap among the 26 HDB towns. The current average resale prices for five-room HDB flats in Sembawang and 99-year leasehold condo units are $497 psf and $881 psf, respectively, which translates to a price gap of $384 psf. This means that owners of five-room flat in Sembawang will have to pay an additional $422,400 to $537,500 if they wish to upgrade to a leasehold condo unit of the same size in the same neighbourhood. (Find HDB flats for rent or sale with our Singapore HDB directory)
On the flip side, Marine Parade in the Central Region has the widest price gap of $1,129 psf, which translates to a price difference of $1.24 to $1.58 million if owner-occupiers want to remain in Marine Parade when they upgrade from a five-room HDB flat to a leasehold condo unit of the same size.
The overall average price gap for all 26 HDB towns is $746 psf, and half of the towns have price gaps under that threshold. The towns with price gaps below the overall average are Sembawang, Bukit Batok, Woodlands, Choa Chu Kang, Yishun, Ang Mo Kio, Jurong East, Hougang, Tampines, Clementi, Pasir Ris, Bedok, and Sengkang. Notably, none of the mentioned towns are in the central region; instead, all towns in the north and east regions have price gaps below the overall average.
As such, owners will find it financially challenging to upgrade from public to private housing if they want to remain in the central region. However, owners of HDB flats in the north and east regions will face fewer financial difficulties upgrading from a five-room HDB flat to a condo unit of the same size and in the same neighbourhood. This could explains why the sales of condos in the Outside Central Region have performed well in recent years.
Options for upgrading in Sengkang, Jurong West and Woodlands
According to HDB’s annual report for 2021/2022, Sengkang (24,728 flats), Jurong West (22,215 flats), and Woodlands (20,790 flats) have the most number of five-room HDB flats among all HDB towns.
Our analysis reveals that the price difference between five-room HDB flats and 99-year leasehold condos in Sengkang in the North-east Region has been growing steadily for the past decade. In 2012, the price gap was $452 psf for condos that are the same size as a typical five-room flat (1,100 to 1,400 sq ft), and $482 psf for a smaller condo unit of 800 to 1,100 sq ft. The price gap has increased significantly to the current $737 psf for the larger condo units and $820 psf for the smaller units.
This year, Compass Heights, located beside Sengkang MRT Station, accounted for the most resale transactions among condo units of 1,100 to 1,400 sq ft in Sengkang. The most recent transaction is for a 1,292-sq ft unit that was sold in July for $1.63 million ($1,260 psf). In July, 42 five-room HDB flats in Sengkang were sold with prices ranging from $507,000 ($436 psf) to $945,000 ($784 psf). This means that the HDB flat owners would have to pay an additional $685,000 to $1.12 million if they wish to purchase the unit in Compass Heights that was recently sold.
The growth in the price difference could be because prices for five-room flats in Sengkang did not grow as quickly as resale condos in the same neighbourhood.
Since 2012, prices for five-room flats in Sengkang grew by 22% to the current average price of $522 psf, which is a significantly weaker growth compared to the price growth of 43% for condo units that are the same size ($1,259 psf) and a price growth of 47% for smaller condo units ($1,342 psf).
Likewise, price appreciation for five-room HDB flats in Jurong West failed to keep pace with leasehold condos in the same neighbourhood. Since 2012, the average price for five-room flats in Jurong West grew only 20% to the current price of $477 psf, while the average resale price for leasehold condo units that are the same size grew 38% to $1,346 psf. The average resale price for smaller condo units grew 31% to the current price of $1,337 psf.
As a result, the price difference between private and public housing in Jurong West has also grown steadily over the past decade. The price gap for five-room flats and leasehold condo units that are 1,100 sq ft to 1,400 sq ft grew from $576 psf in 2012 to $869 psf this year. Likewise, the price gap for smaller condo units of 800 to 1,100 sq ft has increased from $625 psf in 2012 to $860 psf this year.
This year, 10 units of 1,100 to 1,400 sq ft in The Lakeshore were sold for prices ranging from $1.43 million ($1,278 psf) to $1.6 million ($1,350 psf), making it the most popular condo in Jurong West. In July, a five-room flat at nearby 426 Jurong West Avenue 1 transacted for $580,000 ($396 psf), while a smaller five-room flat at 444 Jurong West Avenue 1 also fetched $580,000 ($405 psf). As such, the owners of the two HDB flats along Jurong West Avenue 1 will have to pay at least $850,888 extra to buy the unit at The Lakeshore that sold at the lowest price of $1.43 million.
In contrast, the price gap on a unit basis between public and private housing in Woodlands is much narrower compared to Sengkang and Jurong West. For leasehold resale condo units that are 1,100 to 1,400 sq ft, the price difference grew from $422 psf in 2012 to $503 psf this year. Likewise, the price gap for smaller condo units increased from $469 psf in 2012 to $568 psf this year.
This could be because price growth for five-room flats in Woodlands has surpassed neighbouring condos. Since 2012, the average price for five-room flats in Woodlands grew 30% to the current price of $464 psf, while the average price for condo units of the same size grew only 24% to $967 psf. Smaller condo units fared slightly better, with the average price growing 25% to $1,032 psf.
In July, a five-room flat at 366 Woodlands Avenue 5 was sold for $648,000 ($498 psf). This year, 10 units of a similar size in nearby Casablanca fetched $1.04 million ($929 psf) to $1.2 million ($1,013 psf). This means that the owner of the HDB flat at 366 Woodlands Avenue 5 would have to pay an extra $392,000 to purchase the cheapest unit in Casablanca. Furthermore, the unit at Casablanca is only 1,119 sq ft compared to the 1,302-sq ft HDB flat.
Downsizing or moving to a different location may be your best bet
It is clear that upgrading from public to private housing has become more financially challenging over the years. This is primarily because the price for public housing has grown at a slower pace than resale condos.
However, there is less disparity in the pace of price growth between both types of housing in some towns, such as towns in the north and east regions. As such, homeowners from regions with a wider price gap, such as the central region, may have to move to another region to fulfil their desire to upgrade without overcommitting themselves financially.
Furthermore, our analysis indicates that owners might find it easier if they are willing to opt for a smaller condo unit because the smaller size would mean a lower total price and hence a smaller financial outlay for the upgrader.
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