HDB resale market

The HDB resale market is hot – hotter than I thought.

When I put up a 4-room flat listing in Clementi for sale recently, inquiries came in fast and furious.

I did a quick check on Propertyguru and found out that my unit was the only one on the market within the precinct. There were three other listings, but all of them have a Chinese quota cap.

Within the first week after putting the flat on the market, a young couple gave the option fee. However, the buyers did not exercise the option due to a sudden change in their job situations. After I put it back on the market, I found a new buyer almost immediately!

Many agent friends I know had similar experiences. Their buyers came, they saw, and they ‘conquered’!

One-view-one-kill is commonplace now.

Cash-over-valuation (COV) is also once again the norm. It is not uncommon for buyers to fork out $20,000 to $40,000 of COV. Those who hesitated will miss the deal.

We are like replaying the scenes of 2012, when the market was red-hot, except now I think is even hotter.

hdb resale flat market trend
Since the advent of Covid-19 beginning 2020, HDB resale prices had taken a dramatic upturn

The Property Market Is Performing Well In Every Segment

HDB resale market is not the only market segment to experience this surge in sales activities.

Despite the current Covid-19 pandemic (or maybe it’s the reason), we see the same happening to new launches, private resale condos, HDB and private condo rental market, and also landed housings.   

What is driving the market?

In this article, I will only focus on the HDB resale market.

property market trend q1 2021
Property sales prices and volumes of private condos, landed and HDB have trended up to new highs despite Covid-19

The HDB Resale Market Was Down, Down, Down from 2013

After hitting its peak in 2013, the HDB resale market nose-dived.

That fateful year, our government introduced a slew of cooling measures which brought the escalating property prices to a screeching halt.

Among the measures, the most impactful was the introduction of Mortgage Servicing Ratio (MSR), which put a cap of 30% on the homeowner’s income for loan repayment. As a result of this policy, the loan amount was reduced.

The number of Singapore Permanent Residents buyers for HDB resale flats have reduced significantly because they have to pay a 5% Additional Buyer Stamp Duty (ABSD). Besides, they are only eligible to buy after obtaining permanent residency for three years. They are also not allowed to rent out their flats.

To make matters worse, former National Development Minister, Lawrence Wong, said HDB owners should not assume that the government will put all older flats on Selective En Bloc Redevelopment Scheme.

Overnight, home buyers shunned away from older flats, especially those more than 40 years old.

By December 2014, HDB resale prices dropped to a 41-month low. That year, there were only 17,318 resale flats sold. Compare this number to 37,205 in 2009.

hdb resale market decline from 2013
The fall from the peak in 2013 was painful for many home buyers who bought a resale flat. Some experienced negative sale when they sold their flats subsequently

My Personal Experience In Selling Older Flats

I remembered clearly how I struggled to sell some 40 plus-year-old flats in the Queenstown and Toa Payoh estates. These are some of the earliest housing estates in Singapore.

The common questions asked by buyers were:

  • What will happen to my flat when it reaches 99 years?
  • Will I have a problem selling my flat in a few years’ time?
  • Will I lose a lot of money when I sell in future?
  • Is there any chance for the flat to be chosen for Selective En Bloc Redevelopment?

Inevitably, the prices had to come down. It was the buyers’ market.

No one was willing to pay Cash-Over-Valuation (COV), except in some rare cases.

It was not uncommon for buyers who bought between 2012 to 2013 to experience negative sale when they sold them subsequently. Negative sale occurs when the sales proceeds cannot cover the amount of CPF used plus accrued interest.

It happened to one of my clients who bought a 3-room flat in Holland Avenue in 2010 and sold 2018. He had used 100% CPF to pay for the flat in full.

In some cases, flat owners with negative sales may have to top up the shortfall with cash. That was painful. It was like rubbing salt on the wound.

Still, there were several HDB flats sold for $1 million or more. I was among the blessed few to sell a 20 plus-year-old 5-room flat in Holland Close end 2018 for $1 million.

These HDB flats in Queenstown, built in 1970, were among the earliest housing estates in Singapore. With issue of tenure decay, it was very challenging to sell.

The Turning Point for HDB Resale Flats: Increase in Housing Grants in 2019

September 11 (so ironic) was the turning point.

The government did a few things to spur the lackadaisical HDB resale market.

  • Housing grant for first-timer increased from $30,000 up to $50,000
  • Proximity grant increased from $20,000 to $30,000 for those staying with parents with the qualifying distance extended from 2km to 4km.
  • A revised Enhanced Housing Grant (EHG) allows lower-income families to enjoy up to an additional $80,000 of grant if the household income is lower than $9,000.
  • The household income ceiling to qualify for BTO or housing grants was raised from $12,000 to $14,000 ($16,000 for Executive Condo)

As a result of these changes, HDB resale prices went up by a modest 0.1% in Q3 2019 with 6,339 flats sold. By end 2019, the overall price index went up by 0.5%, and the total sales volume was 23,714, compared to 23,099 in 2018.

The 0.5% increase in the price index was marginal, but it was a sign of a new beginning.

The advent of Covid-19 beginning of 2020 broke the momentum.

Then came the Circuit Breaker that kicked in on April 7, 2020. Everything almost came to a standstill with no house viewing allowed and all show flats closed.

Many agents, including myself, had to learn to ‘conduct’ virtual viewing and consultation via Zoom.

During Circuit Breaker, many property agents, including myself, have to learn how to conduct virtual property tours and consultations.

Property Market Is Ultra-Resilient

Many had expected the property market to crash under the weight of the pandemic. We witnessed how the stock market took a beating. Our economy crumbled with the shutdowns of many businesses. Many lost their jobs or had significant pay-cut.

The government dug deep into our reserves to pump in an unprecedented $100 billion of fiscal stimulus packages to salvage the crisis.    

When we entered Circuit Break Phase 2 from June 19, 2020, the buying frenzy that followed took almost everyone by surprise.

2020 Was A Remarkable Year For HDB Resale Market

The year 2020 ended on a spectacular note for the property market, including HDB resale.

HDB resale volume rose to the highest in eight years. There were 7,787 transactions in Q3 2020 and 7,642 in Q4 2020.

For the whole of 2020, we saw 24,748 resale flats changed hands. This number was higher than the previous record of 25,094 in 2012.

HDB resale prices rose by 5% for the whole of 2020, which was the sharpest increase since 2012 when prices rose 6.5%. The gain in 2019 was only 0.1%

hdb resale market 2021
HDB resale prices continue to climb at an unprecedented level even as we enter the year 2021

The Momentum Continues In 2021

As we entered into 2021, though still faced with the threat of Covid-19 pandemic, the property market continues to hit a high note.

For the HDB resale market, while resale volume dipped slightly by 0.8% quarter-on-quarter to 7,581 units, it doesn’t mean it’s getting weaker. It is because of a shortage of supplies!

For Q1 2021, we saw HDB prices appreciated by another 3% quarter-on-quarter.  We are now about at the same level as the previous high in 2012!

Who would have expected this dramatic reversal of fortune for the HDB resale market?

hdb resale volume q1 2021
More resale flats changed hands during Covid-19 than the last historic high in 2012. Even more remarkable is resale prices are now near historic high

What Are The Possible Reasons Behind The Red-Hot HDB Resale Market?

While the private property market was already moving up north since 2017, what are the possible reasons for the spectacular about-turn of the HDB resale market?

Did the adverse circumstances of Covid-19 contribute in some parts to this phenomenon?

Build-To-Order (BTO) supply cannot meet demand

Covid-19 has caused the delay of many construction works due to stoppages of work and shortage of workers. The significant infection breakouts in the workers’ dormitories worsened the whole situation.

My nephew, who is planning to get married this year, was told that his new flat in Bidadari would only be ready in four to five years. This is about one to two years longer than usual.

How many newly-wed couples can afford to wait this long for their new home?  

As a result, many are turning to the resale market. They can move into their resale flat within three to four months instead of four to five years!

On the ground, I have seen many young couples coming to view my listings. Some are yet to be married but engaged to be married.

Many couples would have chosen BTO flats as their first choice. But new flats in choice locations are heavily over-subscribed. There are not many choices to start with. Even if they are successful in their balloting, the location may be too far from where their parents stay.

The Generous Housing Grants Make Resale Flat More Attractive

One primary catalyst that injects life into the HDB resale market is the generous housing grants offered by the government for eligible first-time buyers.

With the ceiling household income increased from $12,000 to $14,000, it means more can enjoy this benefit.

Take my clients, Jonathan and Joanna, for example. They were married less than a year ago and had been staying with their parents.

Instead of opting for a BTO flat, they decided to buy a 20-year-old 4-room flat near Buangkok MRT for $418,000.

Here is the breakdown:

  • Sales price: $418,000
  • First-timer grant: $50,000
  • Proximity housing grant: $20,000
  • Enhance housing grant: $10,000

With a total grant of $80,000, in effect, they only paid $338,000 for the flat (not factoring in other costs). Compared this to a BTO flat in premium locations with a price tag of $500,000 or more, this is more comfortable on their pocket.

In May 202, Minister for National Development Mr Lawrence Wong, said that construction costs would increase due to Covid-19. With more testings required for workers and effort to improve the conditions of workers’ dormitories, this cost will ultimately pass on to home buyers. This potential increase in prices will narrow the price gap between BTO and resale flats. With the availability of housing grants, the gap is even narrower.

The bottom line is, home buyers especially newly-wed couples, can take possession of their flat in less than four months!

housing grant for first timer
hdb proximity housing grant
enhanced housing grant
hdb income ceiling

An increased number are upsizing and downsizing due to Covid-19

Covid 19 has seen more people upsizing and downsizing for different reasons.

With the new norm of working from home and home-based learning, there is a crying need for more space at home.

I know of a family who sold their 4-Room flat in Holland Drive for more than $900,000 to buy a $1.2m+ Executive Apartment in Mei Ling Street. With three school-going children, they needed four good size bedrooms.

This was one of the 82 million-dollar flat transacted in 2020.

On the other hand, the pandemic has created financial hardships for some. With a sense of uncertainty and insecurity of the future, some private property owners choose to downgrade to public housing.

One such family is the Ong family, whose business was severely affected. They wanted to take the opportunity to retire. Hence, they decided to sell their private condo in the Bukit Timah area which they had stayed for about twenty years.

With the $2.3m sales proceeds, they bought a 4-room flat in Toh Yi Drive for $643,000. After settling their $400,000 debt, they still have more than $1.2m in their coffer.

Many M.O.P. Flats on the Market

Q1 2021 HDB data shows that a record number of 825 flats was sold at above $700,000, of which 393 units at above $800,000.

We also saw 53 resale flats breaching the $1 million price barrier during the same period, another quarterly record. This is more than the total accumulated number of million-dollar flats sold prior to 2018.

In 2020, 82 units surpassed the $1 million mark.

Most of these million-dollar flats are newer flats that have fulfilled their MOP.

In the coming months, more flats will meet their Minimum Occupation Period (MOP).

In 2021, we are expecting 25,530 flats reaching their five-year MOP, followed by another 31,325 in 2022. They are from mature estates such as Clementi, Kallang, Tampines, Bukit Merah, Toa Payoh, and Bishan. All these are breeding grounds for some of the most expensive HDB resale flats. So it won’t be surprising to see another record number of million-dollar flats this and next year.

Many of these homeowners will likely cash out on their MOP flats to upgrade to private condos. This will continue to fuel the private property market. At the same time, we will see an increase in the supply of MOP flats. Despite the high price tags, buyers will go for them, partly because of the lease decay concern.

million dollar resale flats
With many MOP flats on the market, we are seeing more million-dollar HDB flats

MOP Flats Are Not the Main Driver of HDB Resale Prices

By instinct, we would think the many million-dollar MOP flats skewed the price index.

However, based on OrangeTee’s research, even the older flats, including those more than 40 years old, have also recorded gains. What’s most surprising is that flats between 10 to 20 years old made the most gains (11.1%), even more so than the newer flats that are less than 10 years old. That are many who still think that paying $1m for an HDB flat is insane!

Have Singaporeans now overcome the fear of flats that are more than 40 years old? Perhaps with the generous housing grants, this is now an attractive and affordable proposition for lower-income families and singles looking for their own homes.

hdb resale flats by age of flats
Interestingly, older flats are also selling well with higher prices

Should You Buy Or Not Buy A Resale Flat Now?

HDB flats will always be the primary housing of the average Singaporeans. After all, about 80% of Singaporeans live in HDB flats.

To answer the question should you buy or not buy, it really comes down to your needs and budget.

If you are newlywed and need a home urgently, then go for a resale flat. Or, if you are an empty-nester, you can consider downgrading from your private housing to a resale flat to enjoy your retirement. Maybe you are single who just turns 35, now is your chance to own your first home to enjoy your personal space.  

If you can wait for four to five years and don’t mind anywhere, go for BTO flat.

If you can afford it, go for private condo.

There is no right or wrong answer.

There is never a right or wrong time to buy. The right time is when you need a home. The right price is what you can afford.

Housing grants may not be there forever. So grab it while you can.

Furthermore, bank borrowing rates are now at a historic low.

In the short term, we can expect HDB resale prices to maintain their northward trend. If you are renting while waiting for the prices to come down, do factor in the rental cost. Rental is not cheap at the moment because demands exceed supplies.

projection for hdb resale market in 2021
OrangeTee & Tie research forecasts a 5 to 9% appreciation in HDB resale prices for the year 2021

Should I Sell My HDB Flat Now?

Now is a rare window of opportunity for you to make a gain from your HDB flat, thanks partly to Covid-19. HDB resale flats prices have suffered seven years of decline before their dramatic recovery.

Whether to sell your flat now, there is no right or wrong answer.

It really boils down to what do you want.

If you aspire to upgrade to a private condo or own multiple properties, then you should start as early as you possibly can. Waiting any longer may also mean private condo becoming out of reach in the next few years. Do not forget private condos are also appreciating in prices.

And for owners with flats that are more than 40 years old, the honeymoon period may not last very long. After all, the 99-year lease decay issue never goes away. It will come back to haunt us in the years to come. Of course, you can choose to stay put if you intend for it to be your last stop.

If you are at a crossroads, you can contact me for a non-obligatory discussion.

property wealth planning pwp

Danny Han is a licensed property agent since 2005.

As a kampong (village) boy growing up in Holland Village, he has so many fond memories. He grew up with pigsty (yuk!), cemetery, swamp and communal-living (with 10 families under one roof). His childhood games were gasing (spinning top), marbles, kites, spider-fighting and tree-climbing. An open-air cinema was his source of entertainments. 7th-month Hungry Ghost wayang (Chinese opera) and getai (concert) was a once-a-year event that brought the entire village together.

What Danny is passionate about is not just about showing clients properties around Holland Village, but also enjoys sharing anecdotes and nuggets of information that are part of his growing up years.

Danny is a foodie. During his free time, he enjoys going out with his wife, a retired academician, on a food hunt or just to enjoy a nice cup of latte. He also has some foodie kakis who mix work with food. They then share their gastronomic experiences through food blogs. So do watch out, because every time he shows you a property, he will tell you what are the best food nearby!

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