reporter2
18-10-22, 11:43
Pricing mass market homes for HDB upgraders
Oct 10, 2022
Private homes in suburban areas, also referred to as the Outside Central Region (OCR), tend to be the entry point into private housing for many Singaporean households as they are generally priced lower than other private homes in the city fringe and city centre.
Also called mass market homes, private condos in the OCR typically tap into a larger pool of buyers, including those who are trading up from HDB flats in the area. This article will focus on the OCR home transactions by buyers with HDB addresses – commonly seen as a proxy for those upgrading to private homes from public housing.
Specifically, we evaluated transactions of units spanning between 800 and 1,000 square feet (sq ft), which in our view are generally the type of apartments (three-bedders) favoured by families upgrading from their HDB flats as they offer a suitably comfortable living area.
HDB resale keeping pace with private resale
Transaction figures indicate that resale HDB flat prices have risen alongside that of mass market condos, and that the private resale condo market remains a viable option for many HDB upgraders.
In tandem with the rising property market, the median unit price (the amount per square foot, or psf) of four-room and larger HDB resale flats has gone up in recent years to S$490 psf this year (as at Sep 14), representing an increase of 26 per cent from the median price of S$389 psf in 2017. Meanwhile, the median price of resale OCR condos that span 800 to 1,000 sq ft purchased by buyers with HDB addresses climbed by 23 per cent to S$1,196 psf from 2017 to year-to-date (as at Sep 6).
https://i.imgur.com/x0J7Bem.png
Brand new mass market non-landed homes and executive condominiums (ECs) have become pricier for HDB upgraders, as firmer land prices and rising costs exerted upward pressure on selling prices.
HDB upgraders who bought new OCR private condos or new ECs this year have paid more compared to those who did so five years ago. The median transacted price of OCR new apartments (800-1,000 sq ft) came in at S$1,808 psf this year, up by 43 per cent from 2017. For new ECs, HDB upgraders paid a median price of S$1,241 psf for units spanning 800-1,000 sq ft in 2022 – reflecting a 54 per cent increase from S$804 psf in 2017.
Uptrend in OCR new sales prices
The tightness in the supply of unsold new OCR condos and limited fresh launches, as well as firm land costs have played a part in fuelling the increase in new mass market home prices this year.
Looking at new private OCR condo sales, the pricing sweet spot for HDB upgraders has been in the range of S$1.25 million to S$1.5 million – but this has shifted of late with pricier launches.
As a proportion of overall OCR new condos (800-1,000 sq ft) purchased by those with HDB addresses, the portion of units transacted for S$1.25 million to S$1.5 million has declined from 52.8 per cent in 2020 to 45.7 per cent in 2021, and then to 11.2 per cent in the year-to-Sep 6, 2022. Meanwhile, the proportion of OCR new homes (800-1,000 sq ft) sold to purchasers with HDB addresses for S$1.5 million to S$1.75 million has steadily risen in recent years, reaching nearly 52 per cent this year, URA Realis caveat data showed.
https://i.imgur.com/ZVZPVMD.png
Affordability of mass market condos
If one takes a price point of S$1.60 million to S$1.75 million as the general affordability sweet spot for many upgraders, then the unit price for an 800 sq ft apartment will work out to about S$2,000 psf to S$2,180 psf, about S$1,780 psf to S$1,940 psf for a 900-sq ft unit, and S$1,600 psf to S$1,750 psf for a 1,000-sq ft unit. We think these could be the sort of pricing level for OCR new condos that are targeted at HDB upgraders. Developers may moderate land bids accordingly – striking a delicate balance between keeping prices affordable for HDB upgraders and managing increasing costs.
On a psf basis, the median price of OCR non-landed new homes sized 800-1,000 sq ft purchased by those with HDB addresses has tipped over the S$2,000 psf mark in the July till Sep 6 period – up by 12.5 per cent to S$2,026 psf from the median price of S$1,801 psf in Q2 2022. At S$2,026 psf, the median price for new OCR condos purchased by HDB upgraders was about 66 per cent higher than that of OCR resale condos (S$1,223 psf).
New launch AMO Residence in Ang Mo Kio had partly contributed to the higher median price following robust sales during its launch in July 2022. AMO Residence sold 98 per cent of its 372 units at a median price of nearly S$2,110 psf; about 91 per cent of the units were sold to Singaporean buyers.
https://i.imgur.com/NEa10uj.png
We anticipate that the median selling price of overall new OCR projects may hover around the S$2,000 psf range in the near term with Sky Eden@Bedok transacting 118 units at an average price of S$2,100 psf, and Lentor Modern selling 84 per cent of its units also at an average price of about S$2,100 psf. The prices at these two projects are reflective of their convenient location, walking distance to an MRT station, commercial offerings within the development, limited stock in the locale, rising costs and in the case of Lentor Modern, its relatively firm land price at S$1,204 psf per plot ratio.
While new launches have been transacting at slightly higher prices of late, we maintain the view that home buyers generally remain price sensitive; and with rising interest rates, many of them may be more prudent with their property purchase.
Limited stock amid healthy demand
In the year to Sep 6 period, developers sold a total of 1,599 non-landed new homes in the OCR owing to fewer launches – and it looks unlikely that mass market new sales will reach the 4,770 units achieved in 2021, nor the 4,000 to 4,200 units transacted in 2019 and 2020.
Many OCR developments that are on the market have sold out or are close to being fully sold. The limited new OCR unsold inventory will peg new sales volume back this year, and is also partly the reason why fresh projects in the OCR (AMO Residence, Sky Eden@Bedok and Lentor Modern) have performed well at launch.
Amid a dearth in new launches, some buyers have also dipped into the OCR resale market, which offers condos that may be lower priced but are older. Overall, more than 4,460 OCR resale condos were sold this year (till Sep 6), with slightly over 47 per cent of buyers having HDB addresses – higher than the full-year proportion of 42 per cent to 46.9 per cent witnessed between 2019 and 2021.
Non-landed private home prices in the OCR have risen by 11.7 per cent in the first nine months of 2022, based on the URA property price index flash estimates in Q3 2022. We project that the full-year OCR price growth could come in at around 12 -13 per cent for mass market private homes.
Despite the fresh cooling measures introduced from Sep 30, we believe OCR demand remains resilient as the sub-market serves a large pool of buyers. Prices are likely to stay relatively stable as developers do not have that much room to reduce prices, in view of the higher construction costs, firm land costs, and also seeing that many developers have relatively low unsold inventory.
Housing is an essential component in upward mobility, and it is important for mass market private homes to remain generally affordable – not just to help many Singaporeans attain their aspirations of owning and living in a private property, but also to facilitate households’ ability to save and grow wealth.
Ismail Gafoor is chief executive officer at PropNex Realty, and Wong Siew Ying is the head of research and content.
https://www.businesstimes.com.sg/real-estate/property-2022-oct-issue/pricing-mass-market-homes-for-hdb-upgraders
Oct 10, 2022
Private homes in suburban areas, also referred to as the Outside Central Region (OCR), tend to be the entry point into private housing for many Singaporean households as they are generally priced lower than other private homes in the city fringe and city centre.
Also called mass market homes, private condos in the OCR typically tap into a larger pool of buyers, including those who are trading up from HDB flats in the area. This article will focus on the OCR home transactions by buyers with HDB addresses – commonly seen as a proxy for those upgrading to private homes from public housing.
Specifically, we evaluated transactions of units spanning between 800 and 1,000 square feet (sq ft), which in our view are generally the type of apartments (three-bedders) favoured by families upgrading from their HDB flats as they offer a suitably comfortable living area.
HDB resale keeping pace with private resale
Transaction figures indicate that resale HDB flat prices have risen alongside that of mass market condos, and that the private resale condo market remains a viable option for many HDB upgraders.
In tandem with the rising property market, the median unit price (the amount per square foot, or psf) of four-room and larger HDB resale flats has gone up in recent years to S$490 psf this year (as at Sep 14), representing an increase of 26 per cent from the median price of S$389 psf in 2017. Meanwhile, the median price of resale OCR condos that span 800 to 1,000 sq ft purchased by buyers with HDB addresses climbed by 23 per cent to S$1,196 psf from 2017 to year-to-date (as at Sep 6).
https://i.imgur.com/x0J7Bem.png
Brand new mass market non-landed homes and executive condominiums (ECs) have become pricier for HDB upgraders, as firmer land prices and rising costs exerted upward pressure on selling prices.
HDB upgraders who bought new OCR private condos or new ECs this year have paid more compared to those who did so five years ago. The median transacted price of OCR new apartments (800-1,000 sq ft) came in at S$1,808 psf this year, up by 43 per cent from 2017. For new ECs, HDB upgraders paid a median price of S$1,241 psf for units spanning 800-1,000 sq ft in 2022 – reflecting a 54 per cent increase from S$804 psf in 2017.
Uptrend in OCR new sales prices
The tightness in the supply of unsold new OCR condos and limited fresh launches, as well as firm land costs have played a part in fuelling the increase in new mass market home prices this year.
Looking at new private OCR condo sales, the pricing sweet spot for HDB upgraders has been in the range of S$1.25 million to S$1.5 million – but this has shifted of late with pricier launches.
As a proportion of overall OCR new condos (800-1,000 sq ft) purchased by those with HDB addresses, the portion of units transacted for S$1.25 million to S$1.5 million has declined from 52.8 per cent in 2020 to 45.7 per cent in 2021, and then to 11.2 per cent in the year-to-Sep 6, 2022. Meanwhile, the proportion of OCR new homes (800-1,000 sq ft) sold to purchasers with HDB addresses for S$1.5 million to S$1.75 million has steadily risen in recent years, reaching nearly 52 per cent this year, URA Realis caveat data showed.
https://i.imgur.com/ZVZPVMD.png
Affordability of mass market condos
If one takes a price point of S$1.60 million to S$1.75 million as the general affordability sweet spot for many upgraders, then the unit price for an 800 sq ft apartment will work out to about S$2,000 psf to S$2,180 psf, about S$1,780 psf to S$1,940 psf for a 900-sq ft unit, and S$1,600 psf to S$1,750 psf for a 1,000-sq ft unit. We think these could be the sort of pricing level for OCR new condos that are targeted at HDB upgraders. Developers may moderate land bids accordingly – striking a delicate balance between keeping prices affordable for HDB upgraders and managing increasing costs.
On a psf basis, the median price of OCR non-landed new homes sized 800-1,000 sq ft purchased by those with HDB addresses has tipped over the S$2,000 psf mark in the July till Sep 6 period – up by 12.5 per cent to S$2,026 psf from the median price of S$1,801 psf in Q2 2022. At S$2,026 psf, the median price for new OCR condos purchased by HDB upgraders was about 66 per cent higher than that of OCR resale condos (S$1,223 psf).
New launch AMO Residence in Ang Mo Kio had partly contributed to the higher median price following robust sales during its launch in July 2022. AMO Residence sold 98 per cent of its 372 units at a median price of nearly S$2,110 psf; about 91 per cent of the units were sold to Singaporean buyers.
https://i.imgur.com/NEa10uj.png
We anticipate that the median selling price of overall new OCR projects may hover around the S$2,000 psf range in the near term with Sky Eden@Bedok transacting 118 units at an average price of S$2,100 psf, and Lentor Modern selling 84 per cent of its units also at an average price of about S$2,100 psf. The prices at these two projects are reflective of their convenient location, walking distance to an MRT station, commercial offerings within the development, limited stock in the locale, rising costs and in the case of Lentor Modern, its relatively firm land price at S$1,204 psf per plot ratio.
While new launches have been transacting at slightly higher prices of late, we maintain the view that home buyers generally remain price sensitive; and with rising interest rates, many of them may be more prudent with their property purchase.
Limited stock amid healthy demand
In the year to Sep 6 period, developers sold a total of 1,599 non-landed new homes in the OCR owing to fewer launches – and it looks unlikely that mass market new sales will reach the 4,770 units achieved in 2021, nor the 4,000 to 4,200 units transacted in 2019 and 2020.
Many OCR developments that are on the market have sold out or are close to being fully sold. The limited new OCR unsold inventory will peg new sales volume back this year, and is also partly the reason why fresh projects in the OCR (AMO Residence, Sky Eden@Bedok and Lentor Modern) have performed well at launch.
Amid a dearth in new launches, some buyers have also dipped into the OCR resale market, which offers condos that may be lower priced but are older. Overall, more than 4,460 OCR resale condos were sold this year (till Sep 6), with slightly over 47 per cent of buyers having HDB addresses – higher than the full-year proportion of 42 per cent to 46.9 per cent witnessed between 2019 and 2021.
Non-landed private home prices in the OCR have risen by 11.7 per cent in the first nine months of 2022, based on the URA property price index flash estimates in Q3 2022. We project that the full-year OCR price growth could come in at around 12 -13 per cent for mass market private homes.
Despite the fresh cooling measures introduced from Sep 30, we believe OCR demand remains resilient as the sub-market serves a large pool of buyers. Prices are likely to stay relatively stable as developers do not have that much room to reduce prices, in view of the higher construction costs, firm land costs, and also seeing that many developers have relatively low unsold inventory.
Housing is an essential component in upward mobility, and it is important for mass market private homes to remain generally affordable – not just to help many Singaporeans attain their aspirations of owning and living in a private property, but also to facilitate households’ ability to save and grow wealth.
Ismail Gafoor is chief executive officer at PropNex Realty, and Wong Siew Ying is the head of research and content.
https://www.businesstimes.com.sg/real-estate/property-2022-oct-issue/pricing-mass-market-homes-for-hdb-upgraders