The HDB resale price index dropped by 0.2% q-o-q to 130.8 in 2Q2019 from 131.0 in 1Q2019, according to data released by HDB on July 26. This was not surprising as the resale price index has remained unchanged from the flash estimate released four weeks ago, notes ERA Realty Network.
While this is the fourth consecutive quarterly decline, prices have dipped by less than 1% over the past year, indicating that the price decline has largely stabilised, notes Christine Sun, head of research and consultancy at OrangeTee & Tie (OTT).
Lee Sze Teck, director of research at Huttons Asia, says that prices were probably dragged down by flats older than 30 years. “With ageing flats in Singapore and more owners right-sizing, this proportion will likely increase,” he says. “Currently this proportion is around 40%. Many of these older flats are in their original condition and will require a fair bit of renovation. Therefore, they will not be able to command a better value than the previous transactions in the estate.”
Rise in resale transactions
The gradual decline in HDB resale prices appeared to attract more buyers to the resale market, despite the availability of new flats from the government, notes ERA. According to the HDB data, resale transactions rose by 29.8%, from 4,835 cases in 1Q2019 to 6,276 cases in 2Q2019. Compared to 2Q2018, resale transactions in 2Q2019 were 5.6% higher. This is also the first time sales volumes had increased since the implementation of the cooling measures in July 2018. For 1H2019, the number of resale transactions reached 11,111 units, 6.8% more than the 10,399 units sold in 1H2018.
This also comes after the government’s announcement in May this year, of changes regarding the use of homebuyers’ funds in their Central Provident Fund (CPF) for the purchase of older leasehold residential housing and HDB flats. Homebuyers will be able to obtain bigger housing loans for their property purchases, so long as the property’s remaining lease covers the youngest buyer till the age of 95. The revised CPF policy also favours middle-aged HDB homeowners who may want to buy older resale HDB flats to live near their parents. This will then increase the demand for older HDB flats and create a “positive impact” on the HDB resale market once its effect comes into full swing, notes ERA.
There has already been an increase in buying interest for older flats. “After the policy changes in May, we have observed an increase in sales inquiries and a greater buying interest for older flats recently,” says OTT’s Sun. “We have also observed more en bloc owners purchasing older flats after collecting their sales proceeds. Some may regard older flats as affordable given their low price quantum and large living spaces, and they get to keep a sizeable balance amount of their sales proceeds for retirement or reinvestment.”
Sun feels sales volume may continue to trend upwards in the coming months, although she reckons a price recovery may not be as quick given the increasing supply of HDB resale flats. “Given the influx of HDB flats reaching their five-year minimum occupation period this year and potentially more sellers vying for buyers, prices of flats may continue to face downward pressure for some locations. We maintain our price projection of between -1% and -2% for the whole of this year,” she says.
HDB will offer about 3,300 Build-To-Order (BTO) flats in Punggol and Tampines in August 2019 and about 4,500 BTO flats in Ang Mo Kio, Tampines and Tengah in November 2019. There will also be a concurrent Re-Offer of Balance Flats (ROF) exercise and Sale of Balance Flats exercise in August and November 2019 respectively.
Meanwhile, unselected ROF flats are available for open booking by eligible home buyers throughout the year.