15-month wait for private home owners to buy resale HDB 'a form of deterrence for buyers with deep pockets': Analysts
The 15-month wait-out period may also affect the HDB resale market, particularly the bigger five-room and executive flats, say property analysts.
SINGAPORE: Some private property owners might now find themselves in a pickle, having to wait for 15 months before they can purchase a non-subsidised Housing Board flat, said property analysts after the new rule was announced on Thursday (Sep 29).
This wait-out period will kick in after they have sold their private property, according to a joint press release by the Housing Development Board (HDB), the Monetary Authority of Singapore (MAS) and the Ministry of National Development (MND).
Previously, these private property owners were allowed to buy a Housing Board resale flat on the open market, as long as they sell their private properties within six months of the purchase.
This new rule will also apply to those who have already sold their private property prior to submitting an application to buy a resale flat.
However, it will not apply to seniors aged 55 and above who are moving from their private property to a four-room or smaller resale flat.
Other announcements in the latest slew of property cooling measures include tightening maximum loan quantum limits and lowering the loan-to-value (LTV) limit for HDB loans from 85 per cent to 80 per cent.
REASON FOR PAUSE
The 15-month wait-out period is a "surprising turn of events", but will likely serve as "a form of deterrence for buyers with deep pockets", according to Mohan Sandrasegeran, senior analyst of research and content creation at One Global Group.
The ruling comes after more million-dollar flats, including in Woodlands, made headlines in recent months.
"Probably the biggest implication is that many homeowners hoping for a quick profit and enticed by HDB’s fixed interest rate to right-size or downsize to a HDB resale flat will likely be more hesitant now," explained Mr Sandrasegeran.
"Private property owners who are hoping to sell their private home and buy a HDB resale unit have to be prepared for a lengthy wait. It is definitely something worth considering before pulling the trigger on these purchases.
This ruling will likely "curb demand for private property owners who are looking for larger spaces in the HDB resale market", and possibly "taper demand for high-value transactions and deter buyers from going 'all out' for a bigger space in the HDB resale market", said Mr Sandrasegeran.
"For instance, executive flats and loft units are a form of premium units that garner heavy interest. The buyers of these flats are often unaffected by the excessive pricing and have ample liquidity. But with the 15-month wait-out term for private property owners, their hands are forced, and they may likely think twice about buying such a flat."
Mr Sandrasegeran added that the ruling could also result in a "holdback" in some private property owners putting up their units for sale, as well as a potential "drop in volume in the condominium resale market".
Similarly, Tricia Song, head of research for Southeast Asia at CBRE, said the latest cooling measures, including the 15-month wait-out period, might result in a "more severe impact" on the HDB resale market, particularly the bigger five-room and executive HDB flats.
These flats could see "lower demand from private home downgraders or en bloc sellers, and in turn prices would also be moderated", she said.
"However, lower HDB resale prices in turn could also moderate upgraders’ ability and thus demand into private homes. ... Some HDB sellers who had decoupled from selling their HDB flats at high prices and used these proceeds to buy investment private property would also be impacted," she added.
MAKING IT EASIER FOR FIRST-TIMERS, YOUNG COUPLES
But the 15-month wait-out period is likely to be the most significant measure introduced, as this will "tame demand and prices for the upper tier of the HDB resale market" and make it easier for first-timers to purchase homes, said Christine Sun, senior vice president of research and analytics at OrangeTee & Tie.
Ms Sun pointed to HDB data which showed that prices of larger resale flats like five-room flats and executive flats have been "rising much faster" than smaller flats over the past year.
For instance, about one to two flats have been sold for a million-dollars every other day over the past month, she said.
"Demand for these larger flats and million-dollar flats could be largely bought by private homeowners or downgraders who can afford to pay high prices for these flats, thus driving up their prices which will affect the overall price index for all resale flats," she explained.
As such, "this (15-month wait-out period) may cool the market for a while and slow down the pace of price increase for these bigger flats to a certain extent and allow younger couples a better chance of securing these units with lesser competition," she added.
"Overall price growth may moderate which will also help first-timers to have a better chance of buying resale flats if they cannot wait for the long completion period for some BTO flats."
Despite the intention to keep resale flats affordable, Mr Sandrasegeran noted that "genuine" downgraders from private properties might face a dilemma.
"Some homeowners might be in need of immediate finances because of a family emergency, a change in their job status, or other reasons like a change in their personal financial conditions," he said.
"It was mentioned that the authorities would assess their situation on a case-by-case basis. It would be ideal if special circumstances like these are given proper considerations."
RENTAL MARKET IMPACTED
Analysts also noted the 15-month wait-out period's result on the rental market.
Private property owners who still wish to purchase a unit may "need to rent a unit in the interim", which may increase rental demand and push current rental prices even higher, said Ms Sun.
CBRE's Ms Song added that the 15-month wait-out period might actually "help support the rental market for both private and public housing market", especially as more completions are slated for next year.
"As of Q2 2022, 17,394 private homes are due to be completed in 2023, the highest number of completions in a single year since 2016. Residential rents are at a record high now and with this announcement, (rent) may continue to move up and remain elevated into 2023," she said.