SINGAPORE: Elizabeth, like many brides, wishes to have her own home where she may start a family with her husband. However, she believes that the procedure of balloting for a Build-to-Order (BTO) flat and then waiting another three to four years for the flat to be ready is too long.
“I’ve witnessed certain examples with my friends who apply for a flat multiple times and don’t get it, so we don’t have that time to go ballot and potentially have to wait more than five years,” she told CNA.
As a result, the 27-year-old marketing associate is now on the lookout for a resale HDB flat where she may start a family.
She isn’t on her own.
The ongoing pandemic has hampered the supply of public housing, from the COVID-19 epidemic in migrant worker dorms last year to disruptions in the supply chain for construction supplies and limitations on the entry of foreign labor.
READ MORE: Smaller dwellings, shorter-term leases: How the housing environment in Singapore might alter as the population moves The Ministry of National Development warned in April that roughly 85% of BTO projects were six to nine months behind schedule. According to ERA head of research and consultancy Nicholas Mak, these delays have contributed to a higher demand for resale flats among property buyers. Mr Mak stated, “There is a strong demand for resale flats, and the supply of resale flats is inflexible.”
“As a result, we see demand outstripping supply, and prices rise.”
LISTEN: The Heart of the Matter: The Residential Property Market in Singapore: ARE THERE GOING TO BE COOLING MEASURES SOON AFTER A YEAR OF RAISING PRICES? Prices for resale flats have been rising, with numbers posted by real estate portal SRX on Thursday (July 8) showing that they had risen for 12 months in a row as of June this year. The prices of resale flats increased 13.2 percent year over year from June of last year, according to the data.
This index compares the overall price fluctuations of HDB resale flats and is based on resale transactions across towns, flat types, and models.
The Singapore Property Index for HDB resale properties, which is used to compare overall price movements of resale flats, increased from 132.3 to 149.8 last month, according to SRX. The information is based on resale transactions from various towns, flat kinds, and models. All flat types saw an increase in resale prices from the previous year, with three-room units seeing the biggest jump at 14.8%. Four-room units climbed by 12%, five-room residences increased by 11.6 percent, and elite flats increased by 12.3%. According to SRX, prices for mature estates climbed by 10.9 percent year over year, while prices for non-mature estates increased by 14.9%. USE THE MAP TO DETERMINE HOW MUCH A RESALE FLAT COULD COST YOU: According to SRX data, 30,834 resale units were sold between June 2020 and June this year. According to HDB data released earlier this year, 24,748 resale apartments were sold in 2020, up from 23,714 in 2019. According to SRX, 106 HDB flats sold for more than S$1 million in the first six months of 2021 alone, a threefold increase over the same period the previous year. Other factors for the increased prices, according to industry observers, include: “On the demand side, the strong pent-up demand in the private housing market caused some buyers – particularly the sandwich group, who couldn’t afford the high private housing prices – to look for houses in the resale market,” said Professor Sing Tien Foo, director of the National University of Singapore’s Institute of Real Estate and Urban Studies (IREUS). Professor Sing also mentioned the “ultra-low” interest rate as another factor driving up demand for resale HDBs. READ: Due to tightened COVID-19 border restrictions, BTO projects are projected to be ‘delayed’ by a year or more. Mr Ismail Gafoor, CEO of real estate firm Propnex, said, “There is also a bountiful crop of flats departing the five-year Minimum Occupation Period (MOP), where some house owners may sell their flat and hunt for new residences in the resale market or the private residential market.” “This year, around 25,500 flats are expected to meet their MOP, allowing them to be sold in the resale market. These ‘younger’ flats, which have longer leases and are in better shape, tend to attract higher resale prices,” he added. In the next quarters, there is likely to be some “upward pressure” on resale prices, according to Mr Ismail. “Due to the ongoing demand for HDB resale flats, we are predicting HDB resale prices to climb by 9% to 10% for the whole year 2021,” he said. Prof Sing stated that high resale prices are now skewed towards more mature, centrally placed towns, but that the gains could spread to younger estates such as Punggol and Sengkang in the future. In Sengkang, where the oldest flats were completed in 1997, the median sales price for a four-room flat is S$472,000. This value is S$801,444 in Queenstown, which was founded in the 1950s. Nonetheless, Mr Ismail of Propnex pointed out that in non-mature towns, the average selling price had been rising for ten quarters in a row, dating back to the first quarter of 2019. “One possible explanation for the long period of average resale price increases in non-mature estates is that as non-mature towns continue to grow and develop in terms of infrastructure, enhanced connectivity, and amenities, the rate of price growth may outstrip that of mature towns,” he added. “Prices may grow more slowly in mature towns where flats are more expensive because there may be some reluctance to higher asking prices.” READ: Indranee Rajah warns industry players not to “fuel enthusiastic feelings” in the real estate market. THE CONFLICT BETWEEN CASH AND VALUATION Prof Sing mentioned that one issue that may affect the affordability of such flats for buyers is Cash Over Valuation (COV) prices, which he believes would rise due to the present resale flat boom. The difference between the transacted price and the HDB’s official valuation of the unit, which buyers must pay in full in cash, is referred to as COV. This caused issue in the 2010s, when some companies utilized government appraisals as a starting point while negotiating the COV. In 2014, HDB ceased posting COV data and modified the system such that a flat’s valuation would be released only when buyers and sellers had reached an agreement on a transaction price. However, with resale prices on the rise once more, the issue of COV prices has resurfaced. “COVs continue to develop in hot markets where more purchasers are chasing limited supply in the resale market,” Prof Sing said. READ: Property brokers said more HDB resale apartment purchasers are willing to pay prices higher than the units’ assessment. According to CNA, 90 percent of resale agreements now include COV payments ranging from S$5,000 to S$20,000, according to certain property agents. TODAY reported in April that COV prices of between S$100,000 and S$200,000 were not uncommon, citing one buyer who paid roughly S$160,000 for a 27-year-old five-room HDB home in Pasir Ris at the time. “The COV has the undesirable impact of speeding up price rise because no matter what the valuation is, the COV just pulls up the price further in the next month, in the next quarter,” ERA’s Mr Mak explained. He said that one approach would be to simply prohibit the payment of COV. Mr Mak cautioned, however, that this may not address the problem because buyers may just pay the sum to the vendor in secret to obtain the flat they desire without informing the authorities. The emergence of high COVs, according to property analyst Ong Kah Seng, could indicate fierce competition among buyers trying to outbid one another. This might lead to buyer’s remorse if they discover they “overbid” for a flat, he said, advising consumers to do their homework and carefully consider buying a resale flat. “Rising prices, particularly as COV rises, may harm younger couples who do not have the resources to cover the COV. Prof Sing suggested that they hunt for houses in other non-mature estates or apply for fresh BTO launches. READ: HDB resale prices rose 2.8 percent in the second quarter, according to preliminary estimates Acting “against the market’s instinct” According to ERA’s Mr Mak, the issue of growing resale flat prices is essentially a philosophical one, with a need to strike a balance between letting free market principles to function and the “social engineering” required to keep housing cheap. The authorities are paying attention to rising resale prices. Minister for National Development Desmond Lee stressed the need of keeping flats cheap at his ministry’s Committee of Supply debate in March of this year. A new housing model would be introduced for HDB apartments in future areas such as the Greater Southern Waterfront, he said. Mr Lee emphasized the importance of keeping public housing in such regions “affordable and inclusive” over time, warning that flats in such neighborhoods may end up selling for “very high prices” on the resale market, making them exclusively the realm of the wealthy. “In short, we have to act against the market inclination as a social policy,” he stated. He mentioned that suggestions like limiting the pool of resale buyers or enforcing a lengthier minimum occupation term had been made. READ: Commentary: Keeping public housing cheap and equitable in desirable sites like the Greater Southern Waterfront IT DOESN’T HAVE TO BE A BAD THING. Mr Ismail remarked that a drop in HDB apartment resale prices might not always be a good thing. “Because the majority of Singaporeans own and live in HDB flats, many families have a significant portion of their savings invested in them./n
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