The impact of buyers with HDB homes on returns across districts

By Lee Nai Jia

/ URA, DTZ, The Edge Property |

May 23, 2015 8:00 AM SGT

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Singapore: Since the implementation of the Additional Buyer’s Stamp Duty on 8 Dec 2011, prices for non-landed properties have steadily fallen by about 5% as at Q1 2015, according to URA’s price index. Buyers’ appetite for larger units has also diminished. According to the caveats lodged[1], the average strata area transacted shrunk from 139 sqm in Q1 2011 to 126 sqm in Q1 2015. Sales volume for non-landed properties has also significantly declined from 6,800 units in Q1 2011 to 1,760 in Q1 2015.

Besides having to deal with tighter borrowing constraints, home buyers have to pay additional buyers’ stamp duty when they purchase a second home. A Singaporean buyer would have to fork out $100,000 for stamp duties if he were to purchase a second home that cost $1 million today. With mortgage rates increasing, buyers become more cautious and discerning in deciding where and what to purchase. Their purchasing behavior further dictates the house price-return landscape in Singapore.

Equity constrained buyers, such as HDB upgraders or HDB owners that seek investment opportunities in real estate, were especially affected by the measures and the increase in borrowing rates. They seek properties with high growth potential or those that require a lower quantum. Their search for such properties is, however, tampered by the new launches which results in their decisions becoming supply driven.

This is evident when we compare the caveats lodged by buyers in Q1 2013 and those lodged in Q1 2015. When prices for non-landed property units were still trending up in Q1 2013, about 38% of buyers with HDB addresses were purchasing units in Districts 18 (Tampines and Pasir Ris) and 19 (Punggol and Serangoon). This coincided with the launches in both districts in the quarter.

By Q1 2015, the distribution of the purchases by these buyers has shifted. While a sizeable proportion of buyers with HDB addresses continued to transact in the Punggol/Serangoon area in Q1 2015, the proportion dropped from 22% in Q1 2013 to about 18% in Q1 2015. There was more activity in the Yishun and Geylang area. About 10% of the units purchased were in Yishun/Sembawang (District 27) and some 9% of units were transacted in Geylang/Eunos (District 14). These transactions mostly reflected the purchases completed during the launches of Sims Urban oasis and NorthPark residences.

The impact of new supply is slightly more moderated in the resale market, and the purchasing patterns of homebuyers with HDB addresses become more tractable. When prices were increasing in 2013 Q1, buyers with HDB addresses were buying units in Districts 15 (Katong/Joo Chiat), 23 (Hillview/Dairy Farm/ Chao Chu Kang) and 16 (Bedok, Kew Drive, Upper East Coast). Under the softened market conditions in Q1 2015, these buyers continued being active in Katong/Joo Chiat areas. However, their activities in resale market also shifted to the western region. Many of these buyers were drawn to the growth potential of Jurong Gateway area. The future development along the Southern coastline and the burgeoning employment centre in Buona Vista further enhanced its appeal to investors and HDB upgraders.

With more buyers with HDB addresses shifting their focus to the western and northern regions, prices in these regions became more resilient to the joint impact of TDSR and ABSD. Median prices for non-landed properties in the western region registered a positive growth from 2013 to 2015, reflecting the buyers’ confidence in the development of Jurong Gateway. Similarly, the low quantum for the smaller units at NorthPark Residences and its integration with transport and shopping amenities captivated both HDB upgraders and HDB homeowners seeking investment opportunities in the residential market.

In contrast, the purchasing patterns for buyers with private addresses have been very consistent in both primary and secondary market from 2013 to 2015. Most of their activities were focused in the prime districts (9, 10 and 11), which contributed to about a quarter of the units transacted by buyers with private addresses. Another 15% of these buyers acquired properties in District 15 (Katong area) in Q1 2015. They were also active in the emerging districts when the opportunity arose. For instance, some 247 buyers with private addresses purchased units in District 1 in Q4 2014 when Marina One Residences was launched.

While the buyers with private addresses supported the demand and prices for housing in Districts 15 and 1 during the post-TDSR era, median prices of units transacted in the prime districts have been very volatile from Q1 2013 to Q1 2015. The standard deviation for prices in District 11 was about $611 per sq ft within a span of two years. This amounted to nearly 28% of the average price registered during the same period. The large price gap between buyers and sellers and the lack of transactions contributed to the volatile prices.

Moving forward, prices in Katong/Amber Road and Jurong/Lakeside district are expected to hold with consistent demand from both buyers with HDB and private addresses. The announcement of the new high speed rail terminus in Jurong East will further elevate the prices in the Jurong district. Similarly, sales volume is anticipated to increase in regions with newly launched projects that are strategically located.

[1] The cut-off date for the download of caveats is 26 Apr 2015.

This article appeared in The Edge Property Pullout of Issue 677 (May 18) of The Edge Singapore.

Lee Nai Jia is associate director and head of research (Singapore) at DTZ.

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