Rise in HDB resale prices likely to ease; Greater Southern Waterfront a likely PLH candidate

By Felicia Tan

/ EdgeProp Singapore |

December 23, 2021 11:24 PM SGT

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SINGAPORE (EDGEPROP) - The HDB resale market registered its best performance this year since 2010 as prices for resale HDB flats continued to climb in November for the 17th straight month.

Read also: HDB owners’ dilemma: To upgrade or not to upgrade

The number of flats transacted for the year is likely to exceed 29,000, with price gains of over 13%, says Lee Sze Teck, senior director of research at Huttons Asia.

Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie estimates that the total volume may reach up to 31,000 units this year.

“This will have surpassed the 24,714 units sold last year and more than the 23,000 over units sold in 2018 and 2019, before the pandemic started,” she says.

In 2022, HDB resale flats are likely to remain popular, albeit with a lower volume to around 25,000 to 27,000 units owing to higher selling prices.

Prices for HDB resale flats have performed exceptionally well this year amid construction delays with HDB BTO flats, which have increased wait times. (Find HDB flats for rent or sale with our Singapore HDB directory)

The reduced supply of resale flats for sale are also another factor behind the strong showing in price growth and volume, says Huttons’ Lee.

“Buyers who had previously waited out for clarity post-pandemic decided to enter the market when they realised the situation is unlikely to resolve in the near term. There were also buyers who switched to the resale market because of construction delays. The demand and supply mismatch resulted in the surge in the HDB resale market,” he says.

During the year, flats that were located within or nearer the central region remained popular among buyers, resulting in the creation of more million-dollar HDB flats in the process.

“Huttons estimates that there may be some $250 million flats in 2021, up 205% from a year ago,” he adds.

Million-dollar flats

In November, the number of million-dollar HDB flats sold stood at a record 29 units, with the number looking to go higher from here.

However, OrangeTee & Tie’s Sun does not see million-dollar flats being the norm just yet, since they still make up only a small proportion of the total transactions.

While certain flats in the Rest of Central Region (RCR) such as Queenstown, Toa Payoh and Bukit Merah as well as flats in the Outside Central Region (OCR) including Ang Mo Kio, Clementi and Serangoon have hit the million-dollar mark, Sun does not see that affecting buyers.

“They will buy whichever regions that they like or meet their needs,” she explains.

Slower growth in resale HDB prices

On Dec 15 and 16, the government announced a fresh round of cooling measures as well as the building of 1,500 new BTO flats in a new public housing estate in Bukit Merah. The yearly BTO supply will also be increased by 35% over the next two years, with new flats located across mature and non-mature HDB towns.

On this, Lee and Sun estimate that price growth may moderate from the double digits seen in 2021 to ease to between 5% and 8% in 2022.

“The existing tight situation in the HDB resale market may be resolved once bottlenecks in the construction industry are removed and completion of BTO flats return to normal levels,” writes Huttons’ Lee.

“The planned 35% ramp-up in the yearly supply of BTO flats over the next two years will offer buyers more choices on top of those available in the resale market. However, if the price gap between a BTO and resale flat widens, some buyers may choose to wait it out and rent or buy a BTO flat,” he adds.

The number of flats transacted in the resale HDB market may range from 25,000 to 27,000 in 2022, Lee continues.

For OrangeTee & Tie’s Sun, her estimates were reduced from the initial 8% and 11% predicted in 2022.

Before the release of the announcement, Sun said that the slower pace could be attributable to some price resistance since prices for resale flats “have been rising for many months”.

“Some locations have already hit record prices this year,” she adds.

New property cooling measures

Within the HDB market, Sun sees the impact of the new cooling measures as being “less significant” compared to that of the private residential market.

“This is because the price quantum is lower and most hold only one property. However, lower-income earners and self-employed could be more affected by the reduced loan to-value (LTV) as they will have to fork out more cash for their purchases,” she says.

“Those who have financial support from their families or middle-income earners could be less affected as they may have the financial means to pay more in cash. However, buyers in general will be more prudent in their purchases and sellers may have to adjust their price expectations moving forward,” Sun adds.

Tricia Son, CBRE’s head of research, Southeast Asia, deems that the cooling measures will address the government’s objective of stabilising the property market.

The measures will also “help to improve affordability for first-time homebuyers, prevent affluent buyers from buying additional properties for investment for future generations and also reduce the risk of a hard landing when interest rates rise in the near future”, she says.

“In view of the limited new launch pipeline in 2022, we expect new home sales to trend down from the current 13,000 units to a normalised 9,000–10,000 units while prices could be flat or increase by 1%–3% in 2022. Secondary volumes should also normalise as prices stabilise, especially when owners with more than one property will incur higher additional buyers’ stamp duty (ABSD) when replacing the property,” adds Song.

New flats under the Prime Location Housing (PLH) model

Under the PLH model, Huttons’ Lee believes that the Greater Southern Waterfront will be the next likely location, where Keppel Club stands.

The area appears to have a strong value proposition for buyers due to the potential capital gains, notwithstanding the subsidy clawback upon resale, he says.

A new project in Rochor under the new housing model has already been launched as part of the November BTO sales exercise.

Despite the additional rules under the PLH programme, which includes a 10-year minimum occupancy period (MOP), Sun sees buyers still being attracted to flats due to its proximity to the city centre and the Central Business District (CBD).

“Some may also like the prestige of living in the downtown area or to enjoy the price appreciation in the long term. Some may also like the novelty of the whole PLH model and want to have the first-mover advantage of being the pioneer batch to own a PLH flat. Therefore, if the government continues to launch PLH flats in good locations, then demand should remain robust,” writes Sun.

"We are not aware of other PLH locations apart from the Rochor site and Greater Southern Waterfront. Flats in the Greater Southern Waterfront should be quite well received when they are launched next time, given its proximity to the CBD, amenities and redevelopment works for the precinct under the new master plan,” she adds.

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