HDB Q2 resale prices up 1.5%; resale volume falls to lowest in 3 years

SINGAPORE: Prices of resale Housing and Development Board (HDB) flats increased by 1.5 per cent and resale transactions fell to the lowest in three years in the second quarter of 2023.

The Resale Price Index (RPI) for the second quarter of 2023 is 176.2, an increase of 1.5 per cent from the previous quarter, according to data released by HDB on Friday (Jul 28).

This is a higher increase than the 1.0 per cent growth in the first quarter of 2023 but lower than the average quarterly growth of 2.5 per cent in 2022.

The RPI reflects the general price movements in the resale market.

"We are seeing some moderation in the rate of increase in resale prices since the government’s implementation of a strong pipeline of supply, as well as the cooling measures to promote a stable and sustainable property market," said HDB.

Among the cooling measures implemented in December 2021, September 2022 and April 2023 were a wait-out period of 15 months before private property owners can purchase a non-subsidised HDB resale flat and the lowering of loan-to-value limit for HDB housing loans.

The second quarter's figures suggest that the slower price increase observed in the previous quarter was not an "isolated event", said ERA Realty Network's key executive officer Eugene Lim.

"Instead, it points towards a shift towards a more sustainable growth trajectory for HDB resale prices following the robust price increases experienced over the last few years," he added.

The doubling in housing grants given to resale flat buyers led to the quickening in HDB resale prices growth in the second quarter of 2023, noted Lee Sze Teck, Huttons Asia's senior director for data analytics.

He added that 21 out of 26 HDB towns saw price gains in the second quarter, compared to the previous quarter, where only 12 towns had price increases.

"Resale flats in Geylang had the biggest increase of 18.7 per cent, followed by the Central Area 8.6 per cent and Bedok 4.3 per cent," said Mr Lee.

He also noted that Bukit Timah has seen a contraction in resale flat prices for two quarters, adding that possible reasons may include lack of new supply and ageing stock of resale flats.

The resale volume for the second quarter is the lowest in the last three years since the third quarter of 2020, said HDB.

Resale transactions for the second quarter fell by 6.7 per cent, from 6,979 cases in the first quarter of the year to 6,514.

There are seasonal factors at play when it comes to resale volume, more so than for resale flat prices, said HDB.

"Compared to the second quarter of 2022, resale transactions in second quarter 2023 were also 4.5 per cent lower."

Mr Lee said that while grants have given buyers a boost in their housing budget, there is still a "price mismatch between sellers and buyers leading to lower transaction volume".

“The number of HDB million-dollar flats sold in the second quarter continued to exceed 100 units and while these are the minority of resale HDB transactions, they do increase the price expectations of the majority of HDB sellers across the board,” said Mr Lim.

“Beyond a certain point, buyer resistance sets in. With mismatched seller and buyer expectations, deals take longer to close and consequently overall resale volume may decline.”

Some buyers were also lured to the BTO market as HDB increased the supply of flats with shorter waiting time, Mr Lee added.

The top five most popular HDB towns with the most resale transactions in the second quarter of 2023 are Punggol, Woodlands, Sengkang, Yishun and Bukit Batok, noted both analysts.

RENTALS

In the rental market, the number of approved applications to rent out HDB flats rose by 1.9 per cent from 9,657 cases in the previous quarter to 9,842 cases in the second quarter.

Compared to the second quarter of 2022, the number of approved applications in the second quarter of 2023 was 5.7 per cent higher, according to HDB data. 

As at the end of the second quarter of 2023, there were 56,858 HDB flats rented out, a 0.4 per cent rise over the previous quarter's 56,652 units. 

The rise in rental volumes for HDB flats reflects the increased demand for rental in the public housing market compared to the private residential market, Mr Lim said.

"As more tenants feel the pinch of rising rental rates in condos, they gradually shift to HDB flats seeking lower rents," he added.

13,000 FLATS WILL BE LAUNCHED IN SECOND HALF OF 2023

A total of 13,000 Build-to-Order (BTO) flats will be launched in the second half of this year, said HDB.

This follows the launch of close to 10,000 BTO flats in the first half of the year.

“To meet the increased housing demand, HDB has ramped up the supply of (BTO) flats by 35 per cent, from 17,100 flats in 2021, to 23,200 flats in 2022, and 23,000 flats in 2023,” it said.

HDB added that the next sales exercise will be held at the end of September or early October instead of the usual end August to early September 2023 period.

This takes into consideration the ballot results for the May BTO and Sales of Balance Flats exercise, which will only be announced in the first and last week of August respectively, said HDB.

"This new timeline would allow interested flat applicants to know their queue position before deciding whether to apply for a flat in the next sales launch."

HDB will also have "more time to finalise the system changes needed" for the new First-Timer priority category and other changes which will take effect from the next sales exercise.

In the next BTO sales exercise, HDB will offer about 6,700 flats in towns and estates such as Choa Chu Kang, Kallang Whampoa, Queenstown, and Tengah.

For the final sales exercise of 2023, which will be held in December 2023, HDB will offer about 6,300 flats in towns and estates such as Bedok, Bishan, Bukit Merah, Bukit Panjang, Jurong West, Queenstown and Woodlands.

More details on the launch numbers and project details will be provided closer to the launch dates.

“HDB will continue to monitor housing demand closely and maintain a steady pipeline of supply. Meanwhile, we remain on track to launch a total of 100,000 flats from 2021 to 2025,” it said.

MARKET OUTLOOK

With more BTO flats being completed in the coming months, there may be more supply of resale flats for sale as owners making a lateral move to a BTO flat will need to sell off their current flat, Mr Lee said.

"The increase in the number of private residential launches may also see more HDB upgraders opting to sell their flats first so that they do not need to pay the 20 per cent additional buyer's stamp duty (ABSD) upfront."

"The penalties on non-selection of flats by applicants from September 2023 BTO may divert some demand to the resale market," he added.

However, Mr Lee noted that some "attractive BTO projects in mature estates" and BTO projects with shorter construction periods in the September launch may draw some demand away from the resale market and "there may not be any noticeable change in resale demand".

"This increase in both BTO and resale flat supply may moderate prices in HDB resale flats to not more than 5 per cent in 2023. HDB resale flat transactions are estimated to be in the range of 24,000 to 26,000 in 2023."

Mr Lim said that the HDB resale market is expected to stabilise, "primarily driven by the government's plan to release up to 13,000 BTO flats in the second half of 2023".

In addition to the upcoming BTO launches that are likely to divert some demand away from the resale market, he noted that the number of flats reaching the 5-year minimum occupation period (MOP) will be reduced from 15,550 to 6,974 by 2025.

"However, with the introduction of new suburban condo and EC launches in the near future, HDB resale prices are likely to remain resilient as those that are upgrading face higher replacement costs and would want to sell their HDB flats at higher resale prices in order (to) facilitate this asset progression move.”