Huttons' comments on URA and HDB 3Q 2022's flash estimates | Huttons Group

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Huttons’ comments on URA and HDB 3Q 2022’s flash estimates

Huttons Research

OCR prices grew at the fastest pace since 3Q 2009

Prices in the private residential market grew another 3.4% in 3Q 2022, driven by the Outside Central Region (OCR) which accelerated to 7.0% from 2.1% in 2Q 2022. This is the fastest pace of price growth in the OCR since 3Q 2009. In the first nine months of 2022, private residential home prices have appreciated by 7.8%.

There were 3 major launches in 3Q 2022 – AMO Residence, Lentor Modern and Sky Eden@Bedok which are all in the OCR.

AMO Residence was a near sell-out in July, achieving an average price of $2,113 psf. Sky Eden@Bedok sold 75% at an average of $2,100 psf on launch day. These two projects probably played a part in the steep rise in OCR prices.

Prices in the RCR grew another 2.5% in 3Q 2022, more than the price gains in the CCR and they are closing the gap with the CCR. As of 3Q 2022, the estimated median psf of new homes in the RCR stands at $2,428, 13.5% lower than the median psf in the CCR. More buyers are purchasing homes in the CCR due to the narrowing price gap.

An estimated 1,300 and 1,500 units were launched for sale in 3Q 2022. As there was no launch during the Lunar Seventh Month, the number of units launched in 3Q 2022 was much lesser than 2Q 2022’s 1956 units. Sales in 3Q 2022 are estimated to be in the range of 2,100 to 2,300 units, similar to 2Q 2022 despite lesser units launched. Total developer sales in the first nine months of 2022 are estimated to be around 6,300 to 6,500 units.

The final tally for 3Q 2022 is unlikely to differ much from the flash estimate price gains of 3.4%. The other major launch in 3Q 2022 – Lentor Modern recorded a similar average selling price as AMO Residence and Sky Eden@Bedok.

In the wake of cooling measures, developers may defer some private home launches to next year. Transaction volume may be slower in the next three months. New sales transaction volume may hover around 8,000 units, lower than the initial forecast of up to 9,000 units in 2022. Prices are unlikely to be affected. For existing launches in the market, most of them have sold 80% or more of their units and it will be business as usual. Assuming flat growth in 4Q 2022, the market remains on track for up to 8% price growth for the whole year.

EC launches are likely to proceed. The first EC launch in Tengah, Copen Grand will be open for sale on 22 October. It should see healthy interest from buyers in Bukit Batok, Choa Chu Kang, Jurong East and Jurong West. This will be followed by another EC project, Tenet in Dec 2022. Buyers of ECs can opt for the deferred payment scheme allowing them to ride out the current high interest rates. They can use the construction period to build up their savings to cover the lower loan limit.

Unsustainable HDB price gains since circuit breaker and highest quarterly volume of million dollar flats in history

HDB resale prices were up by 2.4% in 3Q 2022, moderating from the 2.8% growth in 2Q 2022. In the first nine months of 2022, HDB resale prices have increased by 7.8%. Compared to quarterly price gains of around 3% in 2021, the price gains in 2022 has stabilised to around 2.5%.

Nevertheless HDB prices have gained 27.2% since the circuit breaker. This is an unsustainable trend and can put homes out of reach for first time buyers. Ground intel tells us that quite a number of HDB flats were purchased by private property owners (PPO) with full cash in 2022. Some PPO are even willing to pay higher amounts of cash over valuation to secure the flat hence pushing up the prices of flats.

Based on data from updated as of 2 Oct 2022, there were 111 million dollar flat transactions in 3Q 2022, 35.4% higher than 2Q 2022. More million dollar flats are appearing in non-mature estates. There were 7 such transactions in 3Q 2022 compared to 4 in 2Q 2022. Bukit Batok and Punggol registered their first million dollar flat in 3Q 2022. An 1,776 sq ft executive maisonette in Bukit Batok was sold for $1,005,000 in July while in September, a 1,603 sq ft 5-room loft unit in Punggol was sold for $1.198 million with the buyer paying a COV of almost $200,000. As of 29 Sept 2022, there are 275 million dollar flat transactions.

An analysis of the million dollar transactions in 2022 to date showed that buyers are turning their attention to 5-room and larger flats. There were 75 transactions in 1Q, 70 in 2Q and 105 in 3Q. The first nine months of 2022 saw 250 5-room and larger flats sold compared to only 210 in the entire year of 2021. Buyers are chasing after space and the HDB resale market has such options at attractive prices.

HDB resale prices are likely to moderate in 4Q in the wake of cooling measures. PPO will now need to sell off their private property and wait 15 months before they can buy a HDB resale flat. This effectively cuts off the demand from PPOs and ex-PPOs. But this is a temporary measure. It may be reinstated back to the old policy once prices stabilise and the attention grabbing million-dollar flat situation has cooled. For seniors above 55 years old, they may still purchase a 4-room and smaller HDB flat without restrictions. Some demand may flow to the 4-room flats and push up prices.

On balance, there should be little impact on HDB resale volume. As of 2 Oct 2022, transaction volume of HDB resale flats is estimated at 21,023 units. HDB resale volume should stay in the range of 6,000 and 6,500 in 4Q 2022, translating into a full year volume of around 27,000 units. The largest ever BTO launch in Nov may draw some demand away from the resale market. Prices are likely to moderate further to 1.0% to 2.0% in 4Q 2022, giving rise to a full year price gain of not more than 10%. These forecasts are unchanged from our previous estimates.

In Nov, HDB will be launching its largest supply of BTO flats ever. There is a good mix across mature and non-mature estates and may draw demand from the resale market. There are a few prime sites in Nov that could be PLH – one in Kallang/Whampoa, one along Queensway and one at Ghim Moh. The BTO at Ghim Moh is likely to be a PLH BTO as Ghim Moh Ascent has been designated as a PLH. The Queensway BTO may be a PLH as it has community care apartments and can promote inclusiveness. The Kallang/Whampoa BTO should be very popular for its location next to a MRT station and Kallang River. The BTO in non-mature estates like Tengah and Yishun may be popular as they are adjacent to nature.