There has been a surge in demand for resale flats as more first-time buyers chose to purchase flats from the secondary market instead of waiting for Build-To-Order (BTO) sales launches. (Picture: Samuel Isaac Chua/The Edge Singapore)
HDB resale prices recorded a quarterly increase of 1.8% over the first three months of this year, the 16th consecutive quarterly price growth in the public housing market. Last quarter’s price increase was also higher compared to the 1.1% q-o-q in 4Q2023.
Resale transaction volumes for 1Q2024 also notched a quarterly increase of 8% from 6,547 transactions in 4Q2023 to 7,068 transactions last quarter. On a yearly basis, the number of resale transactions last quarter is 1.3% compared to 1Q2023.
According to Christine Sun, chief researcher and strategist at OrangeTee & Tie, there has been a surge in demand for resale flats as more first-time buyers chose to purchase flats from the secondary market instead of waiting for Build-To-Order (BTO) sales launches.
Read also: HDB resale prices up 1.7%; million-dollar flats surge 32.8% q-o-q in 1Q2024
The Housing and Development Board (HDB) reduced the total number of BTO sales launches this year from four to three as part of a move to widen the range of flats and locations available to applicants for each launch.
“In addition, an increasing number of private property owners have completed the mandatory 15-month wait-out period implemented in September 2022, for those looking to downgrade to a resale flat. This could have contributed to the surge in resale HDB demand last quarter,” says Sun.
Since September 2022, private homeowners have had to wait for 15 months after selling their property before they can buy a HDB resale flat. Those aged 55 and above who buy a four-room or smaller flat are exempted from this rule.
Lee Sze Teck, senior director of data analytics at Huttons Asia, says that the latest housing data shows that the proportion of five-room and larger flats sold in 1Q2024 grew by 14.4% q-o-q. “Nevertheless, it is 15.5% lower than the transaction volume of 2,465 5-room and larger flats in 3Q 2022 when the policy was implemented. Some of the former private property owners may have bought smaller flats instead of waiting out the 15 months,” he says.
The top five HDB estates that saw the most number of resale transactions last quarter were Jurong West, Punggol, Sengkang, Woodlands, and Yishun. Collectively, they accounted for 35.5% of total HDB resales in 1Q2024.
Based on data compiled by Huttons Asia, 20 out of 26 HDB towns saw an uptick in their average resale price. Resale flats in Serangoon saw the largest price jump of 7.9%, followed by Bishan where the average price climbed 7.5%, and Kallang/Whampoa where prices rose by 5.7%.
On the other hand, HDB resale flats in the Central Area and Marina Parade saw their average transaction price fall for the third consecutive quarter by 2.0% and 6.4%, respectively. Lee attributes this trend to the larger proportion of older flats in these two towns.
The latest housing statistics also reveal that 185 HDB resale flats were sold for one million dollars and more last quarter. This is 38.1% higher than the previous quarter which saw 134 million-dollar flats.
However, it is not simply the rising number of million-dollar flats changing hands in the resale market that is contributing to the overall increase in resale flat prices, says Eugene Lim, key executive officer of ERA Singapore.
“Some 52% of million-dollar flats transacted (in 1Q2024) were 15 years old and less, and these units are in mature estates. Newer resale flats in mature estates are highly coveted by homebuyers and this could pave the way to possibly higher resale prices in the coming months due to their limited availability,” he says.
Resale flats in mature estates will see stronger demand this year, and this trend is expected to translate into steeper price growth in 2024, says Lim.
“While most million-dollar flats are priced between $1 million to $1.1 million, the number of HDB resale flats sold for more than $1.1 million to $1.3 million appears to be inching up. It could be driven by the desire for larger space as one third of the transactions are for executive and multi-generation flats,” notes Lee. He says that the combination of a record number of million-dollar flats and stronger demand for larger sized flats contributed to the faster pace of price growth that the market saw in 1Q2024.
Read also: ANALYSIS: Which HDB towns have the highest and lowest price growth?
The next BTO launch will occur in June, and HDB says that it will offer about 6,800 BTO flats in Jurong East, Kallang/Whampoa, Queenstown, Tampines, Woodlands, and Yishun.
“The June BTO exercise is expected to be well-received by prospective buyers, as it will be the last batch of BTO flats unaffected by the upcoming reclassification framework. Coupled with the June school holidays, we may see a slight dip in resale demand in the Q2 2024,” says Lim.
He is referring to the new classification framework that will see HDB flats split into three categories from 2H2024: Standard, Plus, or Prime.
Lim observes that some buyers will wait for the October BTO launch line up before deciding whether to buy a resale flat instead. “Approximately 9,700 flats will make up the October BTO sales launch and are the first batch of flats under the reclassification model,” he says.
In a press release on April 26, HDB stated: “On the whole, the HDB resale market is showing signs of stabilising, as HDB resale prices rose by 4.9% in 2023, less than half of the 10.4% increase in 2022, and the 12.7% increase in 2021. The economic outlook is subject to uncertainties, particularly stemming from ongoing geopolitical conflicts, which could precipitate negative global supply and demand shocks”.
HDB also gave a pointed reminder to households that domestic mortgage rates are expected to remain at levels that are elevated, relative to the low levels seen over the past decade. “As such, households should continue to exercise financial prudence in their flat purchases. The Government will continue to monitor the property market closely and adjust its policies as necessary to promote a stable and sustainable property market,” the statutory board says.
Looking ahead, Sun expects that sustained demand from first-time homebuyers and private homeowners who are downsizing from private properties may continue to prop up prices in the HDB resale market.
“Moreover, the limited supply of flats in some locations is likely to keep prices stable or even trend higher in the upcoming years,” she says.
She points out that the number of flats that have reached their five-year Minimum Occupation Period (MOP) has decreased from 30,920 units in 2022 to 15,549 units in 2023. “It is projected to drop further in 2024 to 11,952 units, which means that there will be fewer flats available for resale,” says Sun.
“Barring any unforeseen circumstances, ERA estimates that the total resale transaction volume could reach between 26,000 and 27,000 units in 2024, with resale prices expected to rise by a more muted 3% to 5% range by the end of the year,” says Lim.
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