HDB resale prices up 3% q-o-q for second straight quarter in 2Q2021; transactions could hit new decade high

/ EdgeProp Singapore |
Catalysts that drove the public housing resale volume in 2Q2021 include the delay in the completion of new BTO (Built to Order) flats, improved consumer confidence, and more optimistic economic outlook (Photo: Samuel Isaac Chua/EdgeProp Singapore)
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SINGAPORE (EDGEPROP) - Housing and Development Board (HDB) data released on July 23 showed that resale prices of public housing flats rose by 3% q-o-q in 2Q2021, by the same magnitude as the previous quarter. On a y-o-y basis, HDB resale values rose by 11% in 2Q2021. This brings the HDB resale price index to just 2% below the recent peak in 2Q2013. (See also: Age over location when it comes to determining HDB resale price, says Huttons)
Catalysts that drove the public housing resale volume in 2Q2021 include the delay in the completion of new BTO (Built to Order) flats, improved consumer confidence, and more optimistic economic outlook, according to Wong Siew Ying, PropNex head of research and content.
A total of 7,063 resale flats changed hands in 2Q2021, a 6.8% drop from 7,581 units in the previous quarter. “The decline in q-o-q sales was not unexpected as the P2HA [Phase 2 Heightened Alert] during the quarter likely restricted home viewings,” says Wong. “Nevertheless, the HDB resale volume achieved in 2Q2021 is still a very credible performance, coming in higher than many of the pre-pandemic quarterly sales numbers.”
P2HA restrictions made it difficult to conduct property viewing, prompting some buyers to delay their viewing until the restrictions were lifted, says Nicholas Mak, head of research for ERA Realty. “In addition, the supply of resale flats for sale were also limited,” he adds. “Reasonably priced HDB resale flats were quickly snapped up. Property agents were hard-pressed to find a new supply of resale flats.”
Last quarter’s HDB transaction volume was more than double the transaction volume a year ago. Mak attributes this to the “circuit breaker”, which temporarily halted most real estate transactions. “As such, HDB transaction volume in 2Q2020 was the lowest in 10 years — since the beginning of 2010,” says Mak.
The two consecutive quarters of price increases (in 1Q2021 and 2Q2021) may have led some buyers to plunge into the HDB resale market sooner rather than risk higher prices down the road, says Wong. “Transaction data suggest a fairly broad-based increase in prices as most HDB towns posted average resale price growths from 1Q2021 to 2Q2021,” she adds. (See: Find HDB flats for rent or sale with our Singapore HDB directory)

Switch from BTO to resale

A longer waiting time for new BTO flats, has led to a surge in demand for resale flats, and sellers were able to command higher prices for their flats. “The situation has also led to FOMO (Fear of Missing Out) or the “kiasu” syndrome among homebuyers,” says ERA’s Mak. “As a result, Cash Over Valuation (COV) has reappeared in HDB sale transactions.”
Some buyers of BTO flats are likely to appeal to HDB for a waiver of penalty for cancellation of their flat booking, says Lee Sze Teck, Huttons Asia senior director of research. “In some instances, the delays are more than a year,” notes Lee
Nevertheless, the government is releasing more BTO flats in prime locations. In the upcoming August BTO exercise, two BTO projects at Tampines are located near Tampines West MRT station, and offer views of Bedok Reservoir, notes Lee.
The Kallang/Whampoa BTO is within a few minutes’ walk to Boon Keng MRT station, adds Lee. Five-room DBSS (Design, Build and Sell Scheme) flats in the area have seen their values exceed $1 million, according to Lee. “It’s a good indication of the demand for flats in this area,” he adds.
The Queenstown BTO appears to be far from the Queenstown MRT station, but the bus stop at its doorstep can bring residents to either Commonwealth or Queenstown MRT in under five minutes, reckons Lee. “Some of the flats on higher floors may have unblocked views towards the Greater Southern Waterfront,” he says.
With working from home (WFH) becoming the default mode of work, however, buyers now prefer bigger flats that can easily be turned into home offices if needed, observes ERA’s Mark. Compared to the pre-pandemic level in 1Q2020, 5-room and Executive flats had the highest growth in transaction volume in 2Q2021 at 32% and 30% respectively, according to ERA’s research. On the other hand, there were 33% fewer 2-room flats sold last quarter compared to 1Q2021.
Moving in the opposite direction from HDB transaction volume, the HDB rental volume expanded in 2Q2021 despite the tighter curbs, says ERA. HDB rental volume increased by 2.8% q-o-q and 4.2% y-o-y in 2Q2021 to 10,979 units. “With the construction of both new private homes and BTO being delayed by the Covid-19 measures, more people rented flats while waiting for the completion of their new homes,” says Mak.
The reintroduction of P2HA from July 22 to Aug18 could see resale volume for 3Q2021 remaining stable at around the same level seen in 2Q2021, notes PropNex’s Wong.

Resale transaction volume – 'highest since 2010'

The first six months (1H2021) saw 14,644 resale flats transacted. PropNex is anticipating sales to exceed 26,000 flats for the entire 2021 — up from 24,748 flats resold in 2020.
Year to date, HDB resale prices climbed 6% in 1H2021. PropNex is expecting HDB resale prices to increase by 10% to 11% for the whole of 2021.
Last year, 26,025 HDB flats reached their minimum occupation period (MOP) of five years; with another 35,255 flats expected to reach their MOP in 2022. “These flats are newer and could potentially fetch higher resale prices,” says ERA’s Mak. “Should there be no changes in the current market condition, HDB resale flat prices are set to appreciate 8% to 12% y-o-y in 2021 and could continue growing into 2022.”
Construction delays are expected for many BTO projects and many young couples with urgent housing needs may continue to turn to the resale market, although the supply lag may begin to ease next year when construction activities continue to pick up, says Christine Sun, senior vice president of research & analytics at OrangeTee & Tie.
Sun’s expects total HDB resale transactions could hit around 27,000 to 29,000 units this year, surpassing the 24,748 units sold in 2020, and the 23,714 units transacted in the pre-pandemic 2019. She forecasts resale flat prices to rise by 9% to 11% for the whole of 2021.
Even though ERA’s Mak expects transaction volume in 3Q2021 to contract slightly, due to P2HA (from July 22 to Aug 18) and the Hungry Ghost Festival (from August 8 to September 6) limiting viewing activities, he is the most optimistic in his forecast. He is expecting HDB resale volume to end the year at “around 27,000 to 31,000 units, which will be the highest resale volume since 2010”.

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