Is There Still A Chance Of Cheaper Resale HDB Flats In 2021?

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A seasoned content strategist with over 17 years in the real estate and financial journalism sectors, Ryan has built a reputation for transforming complex industry jargon into accessible knowledge. With a track record of writing and editing for leading financial platforms and publications, Ryan's expertise has been recognised across various media outlets. His role as a former content editor for 99.co and a co-host for CNA 938's Open House programme underscores his commitment to providing valuable insights into the property market.
2021 has been one of the toughest years for first-time homebuyers; and for those who want resale flats, it gets worse. Take a deep breath, because as of Q3 2021…resale prices are now officially worse (higher) than they were even in the crazy days of 2013. The questions on everyone’s minds right now seem to be (1) how long will it last, and (2) are we going to see government intervention soon? Here’s our take:
What’s happening to resale flat prices in 2021?

If we go by pure price per square foot, we can see the last peak was in May 2013. At the time, resale flat prices – island-wide – stood at around $478 psf. At the time, the government responded with tweaks to Cash Over Valuation (COV) rules and the Mortgage Servicing Ratio (MSR), which sent resale flat prices plummeting.
But in the span of just around two years, from 2020 to the present, resale flat prices shot up to average of $497 psf, as of end-September 2021.
In many such cases, we assume that it’s highly desirable, mature-estate flats that are seeing big gains. However, a quick check shows that even non-mature estates have seen a sharp pick-up in price.
For example:

Sengkang is a non-mature area, and prices here have yet to reach peak 2013 levels ($495 psf). However, we can see that even in a supposedly “ulu” area, prices at end-September hit $481 psf, with prices and transaction volumes steadily rising.

In Woodlands, once considered a bastion of affordability, prices now average $413 psf; much higher than $401 psf during the town’s last peak (April 2013). Although we should add, transformations from the Woodlands North Corridor is adding a lot of upward pressure to prices here.

In Sembawang, resale flat buyers in September 2013 were often derided for paying $422 psf, for an area with few amenities, and no real plans for upgrading. As of September this year, average prices here have climbed back to $426 psf.
Mature areas and scarce flats have also hit peak prices
87 resale flats transacted at over $1 million, and that was just between January to May. This surpasses 2020, where we saw 82 such transactions for the entire year (and 2020 itself was already a record-breaker, surpassing 71 transactions in 2018).

Most of these flats are not typical flats though, but include maisonettes and DBSS flats. The current record is now $1.295 million for a unit at Natura Loft, in Bishan.
Is there any chance of flat prices coming back down?
- HDB’s response to construction delays will play a major role
- If private housing prices come down, it could sap some demand for resale flats
- The OCR condo market has become a contributing factor
- Prices could dip as the crop of “new” resale flats get bought out

1. HDB’s response to construction delays will play a major role
The worries about construction delays have gotten more intense; from initial six to nine-month delays in around 85 per cent of projects, to news of contractor Greatearth going bust.
Note that the fear isn’t specific to Greatearth projects. Covid-19 is raising manpower and material costs to potentially unsustainable levels; as high as 20 to 50 per cent. The danger is that, when contractors feel margins are too slim (or even non-existent), they’re more likely to pack up and close than carry on.
Handing over construction projects is not a simple task, with delays of up to a year being quite common. As such, some buyers are worried that BTO flats – the most affordable option right now – are going to take an unfeasibly long time to complete.
For owner-investors, who are focused on asset progression, the delays make BTO flats especially unpalatable. The Minimum Occupancy Period (MOP) of five years starts from the point of key collection – so if their flat takes five years to build, it will be a decade before they can upgrade.
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By then, there’s a risk that private home prices – which are also rising – would be out of reach.
This contributes to the roaring demand for resale flats right now, also buoying up Cash Over Valuation (COV).

2. If private housing prices come down, it could sap some demand for resale flats
If resale flat prices are soaring, why aren’t resale flat owners cashing out and upgrading? The answer is simple: private home prices are soaring, right alongside resale flat prices (we have a list of districts that have seen the biggest increases/decreases in prices heWhich Districts Have The Highest Increase/Decrease In Prices Over Covid-19re).

Property TrendsWhich Districts Have The Highest Increase/Decrease In Prices Over Covid-19
by Ryan JBesides this, an uncertain economy – plus high home prices – has prompted more home buyers to consider resale flats instead. One of the realtors we spoke to opined that this is related to the number of million-dollar flats:
“To me, if you spend an amount like $1.29 million on a flat, that is not an investment purchase, that is an own-stay purchase. Many of these are potential buyers who had been saving up for a condo, but have now ‘switched tactic’ and gone for a resale flat instead.
For the price of a fringe region condo, they get a better location, more space, and they take on less debt. If there were more availability in the OCR, or more desirable condos within this $1.3 million price point, I think there would be fewer million-dollar flats.”

3. The OCR condo market has become a contributing factor
Since around April this year, it’s been noted that demand for OCR condos has exceeded supply. This was one of the reasons behind the popularity of Pasir Ris 8, and the reason why the OCR has been dominant for most of 2021.
For HDB upgraders, who make up the majority of the market, OCR condos are at the acceptable price point of about $1.5 million. Multiple launches in the RCR and CCR don’t really soak up demand from this important buyer group, as condos in those regions are typically beyond their budget.
As such, buyers who cannot find a suitable OCR condo – and who are priced out of other regions – instead turn toward bigger, or better-located flats as a compromise (see above).
We do think, however, that increased supply in the OCR could entice some resale flat buyers back into the private market.

4. Prices could dip as the crop of “new” resale flats get bought out
We’ve pointed out that five-year old flats see the highest demand, and often sell at a premium. These flats have no risk of construction delay, the renovations are so new that many buyers can live with them (and renovate after Covid-19), and lease decay is negligible.
These “new” resale flats usually sell out quite fast; while we have no way to tell how soon it will happen, it’s like price increases will slow down afterward.
In a wider sense, we don’t see resale flat prices coming down in 2021; but there are individual exceptions
We have a list of places where you have better odds of finding a reasonably priced flat. In general, you can still get a lower price by:
- Avoiding a “new” resale flat (five-year flats), and getting a cheaper but older option in the same area
- Stick with regular HDB flats, and don’t be lured in by DBSS status (unless you’re sure that’s the end point of your property journey)
- Focus on older listings, where sellers have had more time for realism to sink in
- Get property agents who have transacted in the same block or neighbourhood; the shorter the time period the better. CEA now provides this information publicly. You want to be aware of factors not seen on property portal sites, such as Ethnic Quotas being reached.
For more on property news and updates, follow us on Stacked. We’ll also keep you up to date with in-depth reviews of new and resale properties alike.
Ryan J
A seasoned content strategist with over 17 years in the real estate and financial journalism sectors, Ryan has built a reputation for transforming complex industry jargon into accessible knowledge. With a track record of writing and editing for leading financial platforms and publications, Ryan's expertise has been recognised across various media outlets. His role as a former content editor for 99.co and a co-host for CNA 938's Open House programme underscores his commitment to providing valuable insights into the property market.Read next from Property Market Commentary

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