Steepest increase in HDB 4Q2020 resale price index in nearly a decade: flash estimate

/ EdgeProp Singapore
January 4, 2021 8:34 PM SGT
SINGAPORE (EDGEPROP) - The flash estimate released by the Housing and Development Board (HDB) showed that resale prices of public housing flats rose by 2.9% in 4Q2020. This is the steepest quarterly increase in the HDB resale price index in over nine years, since the 3.8% price growth achieved in 3Q2011, says Wong Siew Ying, PropNex head of research and content.
The flash estimate released by HDB showed that resale prices of public housing flats rose by 2.9% in 4Q2020 - the steepest quarterly increase in the HDB resale price index in over nine years (Photo: Samuel Isaac Chua/EdgeProp Singapore)
For the whole of 2020, HDB resale prices climbed by 4.8%, posting the largest annual price growth since 2012, where resale flat values rose by 6.5%, adds Wong. This marks the second straight year of price growth in the HDB resale market following the 0.1% rise in 2019, she notes. PropNex is expecting HDB resale prices to see further growth of 2% to 4% in 2021, given the anticipated higher demand.
The number of HDB flats transacted in the resale market increased 2.6% y-o-y in the first 11 months of 2020 compared to the corresponding period in 2019, notes Nicholas Mak, ERA Realty head of research. The number of HDB flats transacted in December 2020 is not available yet.
No. of HDB resale transactions
% y-o-y increase
Jan to Nov 2019
Jan to Nov 2020
Source: HDB, ERA Research
The growth in the number of resale transactions of HDB flats towards the end of the year was even higher, with 4,771 HDB flats changing hand in the months of October and November, which was 15.9% higher than the corresponding two months in 2019, observes Mak.
No. of HDB resale transactions
% y-o-y increase
Oct & Nov 2019
Oct & Nov 2020
Source: HDB, ERA Research
The increase in demand for resale flats could also be due to the effects of Covid-19, points out Lee Sze Teck, Huttons Asia director of research. “When the HDB Build-To-Order (BTO) exercise resumed in August 2020, many buyers realised that the completion period has been extended because of Covid-19 and turned their attention to the resale market,” he says. “The influx of buyers and demand outstripped supply and pushed up prices.”
PropNex is expecting resale volume to end the year at about 23,000 units, and the volume to be 3% higher at about 24,000 units in 2021. The ongoing global pandemic and macroeconomic uncertainties have made some buyers more prudent, and caused them to opt for HDB flats which are more affordable. First-timers are also eligible for a $160,000 housing grant from HDB.
The HDB resale market could benefit from both upgraders’ and downgraders’ demand, notes PropNex’s Wong. Some buyers need to upgrade to bigger flats as the family size grows or need a more spacious home due to telecommuting arrangements, while others may be downgrading from private residential properties to HDB flats amid the weak job market and employment outlook, she adds.
no.-of-flats-hitting-MOP - EDGEPROP SINGAPORE
The growth in prices in 4Q2020 could be attributed to the increase in resale transactions of new HDB flats that had reached the end of their five-year Minimum Occupation Period (MOP), points out ERA’s Mak.
An estimated 25,530 HDB flats could reach their five-year MOP in 2021, and another 31,325 flats in 2022, which are both higher than the 24,163 units that was expected to hit MOP in 2020, estimates Christine Sun, head of research & consultancy at OrangeTee & Tie.
“This rising supply of flats attaining MOP will help to stimulate demand and support prices, likely helping to steer the HDB resale market towards a more positive outlook over the next two years,” says PropNex’s Wong.
Recovery in the HDB resale market could also be attributed to the slew of policy changes formulated over the past two years to make public housing more affordable for Singaporeans and enhance the attractiveness of older flats, says OrangeTee’s Sun. “Many new flats which command higher prices have also been transacted over the past few months. That may have lifted the overall price index last quarter.”
Some buyers were also willing to shell out top -dollar for selected flats, notes Sun. For the first 11 months of 2020, a record 72 HDB resale flats were transacted at $1 million and above. This is higher than the previous 71 units sold for the whole of 2018, and 64 units in 2019, according to OrangeTee & Tie. Despite the pandemic, an HDB resale flat at Pinnacle@Duxton was transacted at a record price of $1.258 million in September last year.
“The HDB resale market may continue to heat up this year as market analysts are predicting a gradual macroeconomic recovery from the second half of 2021,” says Sun. “Couples who are still doing well in their jobs may proceed with their upgrading plans, while those who are still affected by the pandemic may downgrade from private housing to HDB flats. This may result in more flats being put on the market as well as more flats changing hands in the coming months.”
Hence, Sun expects prices of resale flats to rise by a further 2% to 5% this year.