HDB resale flat prices propped up by 'unrelenting interest' in million-dollar deals: Analysts

SINGAPORE: Continued strong demand and “unrelenting interest” in million-dollar deals are among factors that have pushed up prices of Housing Board resale flats for the 10th consecutive quarter, analysts said.

Official figures released on Friday (Oct 28) showed Housing and Development (HDB) resale prices for the third quarter were up 2.6 per cent from the previous three months, slightly above the flash estimate of 2.4 per cent provided by HDB earlier this month.

“The continued rise in resale prices in the third quarter was a result of steadfast demand for HDB resale flats and unrelenting interest in million-dollar deals, both of which fuelled overall resale price growth,” said Mr Mohan Sandrasegeran, senior analyst for research and content creation at One Global Group.

The third quarter also saw 7,546 resale flat transactions, up 10.7 per cent from the earlier quarter.

The exuberant HDB resale market - even in the face of rising interest rates - prompted authorities to announce another slew of property curbs last month.

This included tighter limits on housing loans and a wait-out period of 15 months for private property owners downgrading to HDB resale flats.

Analysts said the effects of these measures will likely be felt in the coming quarter, and help to moderate price growth.

STRONG DEMAND AND MILLION-DOLLAR DEALS

Several factors are fuelling the persistently strong demand for HDB resale flats.

For one, first-time buyers with “urgent housing needs” are increasingly unwilling to wait out long completion times for Build-to-Order (BTO) flats, said PropertyGuru Singapore’s country manager Tan Tee Khoon.

There is also an “enduring” preference for larger homes, Dr Tan said, citing a survey by his firm that showed 44 per cent of resale flat buyers taking a keen interest in jumbo flats.

“Due to their size and the dwindling supply of these bigger flat types, these in-demand flats can command price premiums, which contributed to the number of million-dollar HDB flats transacted.”

Other bigger flat types have also seen keen demand and in turn, higher prices.

Resale transaction numbers for four-room, five-room and executive flats in the third quarter were the highest since the fourth quarter of 2021, said Mr Sandrasegeran. 

Among them, executive flats saw the largest growth with a total of 552 resales transacted, versus 475 in the second quarter. 

This demand for larger homes is “one of the main drivers” for headline-grabbing million-dollar flat sales, said Mr Sandrasegeran, adding that around 65 per cent of the 277 million-dollar flats sold in the first nine months of this year were five-room units.

Overall, the pace of million-dollar flat sales has surpassed that of last year, Dr Tan said.

There were 111 million-dollar HDB resale flat transactions that breached the million-dollar mark in the third quarter of 2022 – a record number of such deals in one quarter alone, he said.

Meanwhile, more estates continue to see resale flats breach the seven-digit mark, as high private property prices prompt more “downgraders” to turn towards the HDB resale market.

“These buyers are likely to turn towards non-mature estates, which are further away from the city centre, but more affordable than their city-fringe counterparts,” Dr Tan added.

Another factor driving home buyers to the HDB resale market, according to Mr Sandrasegeran, is how “fixed” interest rates offered by HDB act as a “safe and promising option” in an environment of continued interest rate increases by the US Federal Reserve, which has had a spillover effect on local rates.

The concessionary interest rate for HDB loans is pegged at 0.1 per cent above the prevailing Central Provident Fund (CPF) Ordinary Account (OA) interest rate of 2.5 per cent. This is reviewed quarterly, but has remained unchanged since 1999.

PRICE GROWTH TO MODERATE: EXPERTS

However, the pace of growth in third-quarter HDB resale prices has also slowed compared to the second quarter, when prices rose 2.8 per cent.

This slower price growth indicates that the housing sector is starting to feel the effects of rising interest rates and inflation, said Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie.

“Rising inflation will erode buyers’ affordability, especially middle- and lower-income Singaporeans, who form the bulk of purchasers. As more budget is used for necessities and daily expenditures, buyers may be less willing to pay more for their next home,” she said.

Ms Sun noted that Singapore’s HDB resale market will remain attractive in the long term, even with the cooling measures in place.

This boils down to factors such as a tight domestic labour market, strong household balance sheets and sustained income growth; all of which will continue to prop up housing demand.

“Past trends indicate that our property market is highly resilient and usually rebounds within six months of a cooling measure (announcement),” she said.

But industry experts are still expecting price growth to moderate in the coming quarter as the effects of the latest property curbs, such as a lower loan-to-value limit for HDB loans, kick in.

The costs of financing an HDB flat will also increase due to rising mortgage rates, said PropertyGuru's Dr Tan.

Banks have already been making swift adjustments to their mortgage rates, with the three local lenders – DBS, OCBC and UOB – raising their fixed rate home loans to as high as 3.85 per cent earlier this month.

“As buyers and sellers recalibrate their expectations, it is expected that sales will slow in the immediate term,” said Dr Tan.

Huttons Asia’s senior director of research Lee Sze Teck agreed, noting that HDB resale prices are likely to moderate in the fourth quarter in the wake of the latest cooling measures.

“Private property owners will now need to sell off their private property and wait 15 months before they can buy an HDB resale flat. This effectively cuts off the demand from (these buyers),” he said.

That said, some demand may flow to the 4-room flats and inadvertently push up prices for this smaller flat type.

Under the new curbs, the 15-month wait-out period will not apply to those aged 55 and above, who will still be able to move from a private property to a four-room or smaller HDB resale flat.

Mr Lee noted that in the third quarter, three-room and four-room flats saw average price growth of 2 per cent and 1.7 per cent from the previous three months.

He also pointed to a recent sale of a four-room flat at Pinnacle@Duxton for S$1.37 million, which marks the most expensive four-room flat in Singapore to date.

Meanwhile, HDB resale volume should stay in the range of 6,500 and 7,000 in the fourth quarter, translating into a full year volume of around 28,000 units, said Mr Lee.

“The largest-ever BTO launch in November may draw some demand away from the resale market,” he added.

“Prices are likely to moderate further to 1 per cent to 2 per cent in the fourth quarter, giving rise to a full year price gain of not more than 10 per cent.”