New Reporter
05-05-23, 11:40
From HDB to condo: Upgrading quest has become more challenging
Data suggests HDB dwellers are being priced out of the private property market
Apr 21, 2023
BALLOT for an HDB flat. Get married and move in. Fulfil the minimum occupation period. Sell the flat and upgrade to a condominium. This is the typical real estate journey of many Singaporean couples.
But data suggests the final step is becoming increasingly difficult, with fewer owners of Housing and Development Board flats able to afford an upgrade. The numbers also point to a potential opening for buyers who can wait.
Buyers of new condominiums in the outside central region (OCR) – the suburbs of Singapore, where property is typically more affordable – are no longer mostly HDB dwellers.
Last year, for the first time in 15 years, private home dwellers outnumbered HDB dwellers in the caveats lodged for new OCR condominiums.
https://i.imgur.com/XSqyWct.png
Buyers with HDB addresses made up 42.6 per cent of buyers who lodged caveats, while buyers with private home addresses accounted for 57.4 per cent.
The last time HDB dwellers were outnumbered by private home dwellers was in 2007, when HDB dwellers comprised 37.6 per cent of buyers and private home dwellers made up 62.4 per cent.
This data came from an analysis done by property agency PropNex : OYY -1.83% for The Business Times. PropNex had looked at caveats lodged from 2005 to Mar 26, 2023, available from Urban Redevelopment Authority (URA) database Realis.
Buyers with HDB addresses are typically those upgrading from public housing, though they may also be investors living in public flats who are buying a private property for investment.
In 2022, the number of HDB upgraders acquiring new OCR condominiums was the smallest proportion across the period of analysis, falling steeply from 53.5 per cent in 2021.
Wong Siew Ying, PropNex’s head of research and content, says the low proportion of HDB upgraders could, in part, be due to the higher prices of new launches, which were a result of fewer launches and limited unsold stock in the suburbs.
The median price per square foot (psf) for suburban condominiums reached a new benchmark of S$2,000 in 2022. Sky Eden@Bedok pulled in a median price of S$2,118 psf, while Lentor Modern in the north of Singapore fetched a median price of S$2,108 psf when launched.
The OCR, she says, has the lowest number of unsold private residential units, excluding executive condominiums (ECs). Planning approvals as of Q4 2022 stood at 3,672 units – one of the lowest quarterly figures in recent years and a mere 20 per cent of that in Q4 2011.
The OCR condominium market also attracts investors who buy private property to resell or to rent out, but these investors might now be staying on the sidelines.
Says Eugene Lim, key executive officer at ERA Realty: “As interest rates have been on the increase, investors could have become more selective and are taking a longer time to evaluate the options available before committing. It does not necessarily mean they are priced out.”
Various government cooling measures could also have affected investment demand. The Additional Buyer’s Stamp Duty (ABSD) was raised in December 2021.
At the same time, the total debt servicing ratio (TDSR) threshold and the loan-to-value limit were tightened. These would have impacted buyers’ ability to buy larger, pricier units.
OCR appeal
HDB dwellers have consistently outnumbered private home dwellers in the new OCR condominium market, and for good reason – that is, till now.
Lim says HDB upgraders may be attracted to new launches as they have no immediate housing needs.
Buyers of new launch projects also enjoy the ability to make payments in stages and percentages, according to the progress of construction. This is easier on the pocket, he says, as bank loans for such purchases are only disbursed in corresponding amounts.
In contrast, resale properties require buyers to obtain a loan for the entire value of the unit purchased. Buyers of resale OCR condominiums are therefore more likely to have a private home address. Private home dwellers have outnumbered HDB dwellers in the resale OCR condominium market every year except 2009.
https://i.imgur.com/5r9XMEZ.png
Whether new or resale, however, OCR condominiums are still a popular choice for HDB upgraders.
Wong of PropNex notes that the proportion of buyers with HDB addresses for non-landed new and resale private homes in the OCR has generally stayed in the mid-40 per cent to mid-50 per cent range, as the suburbs offer most of the more affordable private homes. She added that the suburbs are viewed as an entry point into the private home market by HDB upgraders, who tend to be more price-sensitive.
But she also points out that HDB dwellers are falling among the ranks of those buying OCR condominiums.
HDB upgraders collectively accounted for 45 per cent of non-landed OCR home purchasers across both new sale and resale segments in 2022.
This proportion was lower than the average of 51.4 per cent for the 2005-2022 period. It was also the lowest since 2007, when 32.9 per cent of total purchasers had an HDB address.
Even as condominium prices soar, HDB price increases aren’t keeping pace. This has made it tougher for HDB owners to trade up.
The median price of resale HDB flats has risen by 133 per cent between 2005 and 2022. That is a slightly faster pace than the 131 per cent price change for resale OCR condominiums, but slower than the 162 per cent jump in median price for new OCR condominiums over the same period.
The price premium of new non-landed OCR private homes based on median prices over median HDB resale price in 2022 was S$1.21 million, or 2.8 times that of S$437,374 in 2005.
https://i.imgur.com/nsoo3Iq.png
In percentage terms, the premium of 230.8 per cent was the widest since 2005. The last time the difference was that large, at 229 per cent, was in 2007.
The corresponding premium for resale non-landed OCR condominiums over median HDB resale price was S$675,000, or 2.3 times that of S$295,000 in 2005.
In percentage terms, the premium was 128.6 per cent – the narrowest since the 121.2 per cent recorded in 2009.
https://i.imgur.com/1hRO4Zs.png
Alternative upgrades
Some HDB upgraders may be opting for ECs instead of private condominiums, says Wong. These hybrid housing options are sold as public housing but are converted into private housing after 10 years.
Data on ECs was not analysed for this story, but ERA’s Lim says data gathered by his agency from new EC launches it marketed showed that HDB upgraders made up 70 per cent of purchasers.
New ECs are a logical upgrade for HDB owners whose salaries do not exceed the eligibility ceiling of S$16,000 per household, Lim says, as ECs typically have the same specifications as most OCR private condominiums. “They are also priced about 20 per cent cheaper than private condominiums in the same location.”
Indeed, private condominiums are not the only option for an HDB upgrader. PropNex’s Wong notes that a typical asset progression journey is from a four-room HDB flat to a larger HDB resale flat, an EC, or a private condominium.
“We think that typically, where budget permits, a four-room flat tends to be a good size for a first home for young households – providing sufficient space for couples who are planning to have kids. Some flat buyers may want to buy five-room flats, which are larger and will provide more space for remote working, and accommodate a hobby room and/or guest room, depending on their lifestyle,” she says.
PropertyGuru’s Singapore country manager Tan Tee Khoon suggests that for HDB flat owners who need more space, it makes more financial sense for them to purchase a resale flat. A million dollars will get them 1,200 sq ft, compared with 500 sq ft for a new OCR condominium.
Honey, I shrunk the apartment
The sweet spot for HDB upgraders used to be of an area of 1,200 square feet (sq ft) to 1,400 sq ft for new OCR condominiums. Since 2013, however, these buyers have increasingly been buying units that are almost half that size: 600 sq ft to 800 sq ft.
Among HDB dwellers who bought new OCR condominiums in 2022, 600 sq ft to 800 sq ft units formed the largest proportion of purchases at 38.4 per cent.
Among buyers of new OCR condominiums, 600 sq ft to 800 sq ft units made up 41.3 per cent of purchases in year to Mar 26. The proportion of HDB upgraders buying units of this size was 1.4 per cent in 2005. That year, 39.5 per cent of HDB upgraders picked apartments of 1,200 sq ft to 1,400 sq ft.
https://i.imgur.com/VDzc333.png
PropNex’s Wong notes that the general uptrend in new OCR condominium prices led to buyers purchasing units of a smaller size to maintain affordability on a price quantum basis. However, shrinking household size and more single-person households might also have possibly led buyers to “right-size” their homes.
The average price of 1,200 sq ft to 1,400 sq ft non-landed new condominiums in the suburbs bought by those with HDB addresses was S$665,261 in 2005. It rose to S$1.1 million in 2010 and breached the S$2 million mark in 2022.
The amount paid in 2005 for a 1,200 sq ft to 1,400 sq ft home would only have been enough for the smallest available new unit of 400 sq ft to 600 sq ft in 2016. By 2017, that amount was entirely insufficient for a new condominium.
The average price paid by HDB upgraders for a 400 sq ft to 600 sq ft new unit exceeded S$700,000 in 2017 and further jumped to S$1.1 million in 2022.
https://i.imgur.com/602av76.png
Using the Monetary Authority of Singapore’s consumer price index inflation calculator, the 2005 budget would be equivalent to about S$940,000 in 2022. This would not be enough to buy a new 400 sq ft to 600 sq ft unit.
The majority of HDB upgraders went for 1,200 sq ft to 1,400 sq ft resale condominium units in the OCR, during the period studied, although 1,000 sq ft to 1,200 sq ft units have been most in demand for the period since 2021.
https://i.imgur.com/Ce8cF5e.png
PropNex’s Wong notes that the average price paid for a resale OCR non-landed home (excluding ECs) has risen substantially over the years.
In 2005, the average price for 1,200 sq ft to 1,400 sq ft resale OCR condos came in at S$539,058. This crossed the S$1 million mark in 2011.
By 2022, a buyer with a budget of S$1 million would not have been able to afford a resale unit bigger than 800 sq ft in the OCR.
There was an uptick in demand for larger units in 2021 and 2022, though, as the pandemic lockdowns and ensuing work-from-home arrangements led many people to reassess their space requirements, Wong notes.
“The pandemic did not impact everyone equally. While hospitality and travel-related businesses took a bigger hit, many other sectors were less severely affected and professionals working in these sectors likely took the chance to enter the market. Interest rates were also much lower in 2021 and the first half of 2022 (before rising considerably from June onwards) compared to this year,” she adds.
https://i.imgur.com/LbmgBoy.png
In good time
All is not lost, however. Historical data shows measures introduced by the Government to cool the property market in 2012 and 2018 had the desired effect, while financial crises have a similar effect on property prices.
PropNex observed a sharp increase in the proportion of HDB dwellers buying new private OCR condominiums during the years following the global financial crisis: a 13.8 percentage point year-on-year jump in 2008 and 7.3 percentage point year-on-year rise in 2009.
Wong notes that the median price of OCR new non-landed homes fell by a cumulative 13 per cent in the first half of 2008 and by 15 per cent quarter on quarter (qoq) in the first quarter of 2009, which could have encouraged more upgraders to enter the market.
The median unit price for new sale OCR non-landed homes was S$837 psf in the first quarter of 2008 and S$620 psf in the first quarter of 2009.
There was a similar increase in buying activity in 2014, she says, which could be attributed to the fall in prices after the cooling measures in 2013.
That was the year the government introduced the TDSR and hiked the ABSD. This led to a 22.9 per cent q-o-q decline in the median unit price of OCR new non-landed homes in Q4 2013, which could have paved the way for more buying interest in 2014 among HDB upgraders.
Lim of ERA, however, says high interest rates and cooling measures may not be enough to push prices down this time, particularly as demand remains resilient. Rather, buyers are likely to be more discerning and rational in their decision-making.
Higher interest rates affect those buying resale more than those buying new launches, he adds.
PropertyGuru’s Dr Tan also expects prices to stay resilient as supply remains scarce. The declining inventory of new homes is not being replenished fast enough to meet the high demand.
“Developers facing impending ABSD deadlines with unsold units may offer attractive discounts to sell out. That said, developers with healthier financials may pay ABSD and buy time to sell their remaining units at market prices,” says Dr Tan.
https://www.businesstimes.com.sg/opinion-features/features/hdb-condo-upgrading-quest-has-become-more-challenging
Data suggests HDB dwellers are being priced out of the private property market
Apr 21, 2023
BALLOT for an HDB flat. Get married and move in. Fulfil the minimum occupation period. Sell the flat and upgrade to a condominium. This is the typical real estate journey of many Singaporean couples.
But data suggests the final step is becoming increasingly difficult, with fewer owners of Housing and Development Board flats able to afford an upgrade. The numbers also point to a potential opening for buyers who can wait.
Buyers of new condominiums in the outside central region (OCR) – the suburbs of Singapore, where property is typically more affordable – are no longer mostly HDB dwellers.
Last year, for the first time in 15 years, private home dwellers outnumbered HDB dwellers in the caveats lodged for new OCR condominiums.
https://i.imgur.com/XSqyWct.png
Buyers with HDB addresses made up 42.6 per cent of buyers who lodged caveats, while buyers with private home addresses accounted for 57.4 per cent.
The last time HDB dwellers were outnumbered by private home dwellers was in 2007, when HDB dwellers comprised 37.6 per cent of buyers and private home dwellers made up 62.4 per cent.
This data came from an analysis done by property agency PropNex : OYY -1.83% for The Business Times. PropNex had looked at caveats lodged from 2005 to Mar 26, 2023, available from Urban Redevelopment Authority (URA) database Realis.
Buyers with HDB addresses are typically those upgrading from public housing, though they may also be investors living in public flats who are buying a private property for investment.
In 2022, the number of HDB upgraders acquiring new OCR condominiums was the smallest proportion across the period of analysis, falling steeply from 53.5 per cent in 2021.
Wong Siew Ying, PropNex’s head of research and content, says the low proportion of HDB upgraders could, in part, be due to the higher prices of new launches, which were a result of fewer launches and limited unsold stock in the suburbs.
The median price per square foot (psf) for suburban condominiums reached a new benchmark of S$2,000 in 2022. Sky Eden@Bedok pulled in a median price of S$2,118 psf, while Lentor Modern in the north of Singapore fetched a median price of S$2,108 psf when launched.
The OCR, she says, has the lowest number of unsold private residential units, excluding executive condominiums (ECs). Planning approvals as of Q4 2022 stood at 3,672 units – one of the lowest quarterly figures in recent years and a mere 20 per cent of that in Q4 2011.
The OCR condominium market also attracts investors who buy private property to resell or to rent out, but these investors might now be staying on the sidelines.
Says Eugene Lim, key executive officer at ERA Realty: “As interest rates have been on the increase, investors could have become more selective and are taking a longer time to evaluate the options available before committing. It does not necessarily mean they are priced out.”
Various government cooling measures could also have affected investment demand. The Additional Buyer’s Stamp Duty (ABSD) was raised in December 2021.
At the same time, the total debt servicing ratio (TDSR) threshold and the loan-to-value limit were tightened. These would have impacted buyers’ ability to buy larger, pricier units.
OCR appeal
HDB dwellers have consistently outnumbered private home dwellers in the new OCR condominium market, and for good reason – that is, till now.
Lim says HDB upgraders may be attracted to new launches as they have no immediate housing needs.
Buyers of new launch projects also enjoy the ability to make payments in stages and percentages, according to the progress of construction. This is easier on the pocket, he says, as bank loans for such purchases are only disbursed in corresponding amounts.
In contrast, resale properties require buyers to obtain a loan for the entire value of the unit purchased. Buyers of resale OCR condominiums are therefore more likely to have a private home address. Private home dwellers have outnumbered HDB dwellers in the resale OCR condominium market every year except 2009.
https://i.imgur.com/5r9XMEZ.png
Whether new or resale, however, OCR condominiums are still a popular choice for HDB upgraders.
Wong of PropNex notes that the proportion of buyers with HDB addresses for non-landed new and resale private homes in the OCR has generally stayed in the mid-40 per cent to mid-50 per cent range, as the suburbs offer most of the more affordable private homes. She added that the suburbs are viewed as an entry point into the private home market by HDB upgraders, who tend to be more price-sensitive.
But she also points out that HDB dwellers are falling among the ranks of those buying OCR condominiums.
HDB upgraders collectively accounted for 45 per cent of non-landed OCR home purchasers across both new sale and resale segments in 2022.
This proportion was lower than the average of 51.4 per cent for the 2005-2022 period. It was also the lowest since 2007, when 32.9 per cent of total purchasers had an HDB address.
Even as condominium prices soar, HDB price increases aren’t keeping pace. This has made it tougher for HDB owners to trade up.
The median price of resale HDB flats has risen by 133 per cent between 2005 and 2022. That is a slightly faster pace than the 131 per cent price change for resale OCR condominiums, but slower than the 162 per cent jump in median price for new OCR condominiums over the same period.
The price premium of new non-landed OCR private homes based on median prices over median HDB resale price in 2022 was S$1.21 million, or 2.8 times that of S$437,374 in 2005.
https://i.imgur.com/nsoo3Iq.png
In percentage terms, the premium of 230.8 per cent was the widest since 2005. The last time the difference was that large, at 229 per cent, was in 2007.
The corresponding premium for resale non-landed OCR condominiums over median HDB resale price was S$675,000, or 2.3 times that of S$295,000 in 2005.
In percentage terms, the premium was 128.6 per cent – the narrowest since the 121.2 per cent recorded in 2009.
https://i.imgur.com/1hRO4Zs.png
Alternative upgrades
Some HDB upgraders may be opting for ECs instead of private condominiums, says Wong. These hybrid housing options are sold as public housing but are converted into private housing after 10 years.
Data on ECs was not analysed for this story, but ERA’s Lim says data gathered by his agency from new EC launches it marketed showed that HDB upgraders made up 70 per cent of purchasers.
New ECs are a logical upgrade for HDB owners whose salaries do not exceed the eligibility ceiling of S$16,000 per household, Lim says, as ECs typically have the same specifications as most OCR private condominiums. “They are also priced about 20 per cent cheaper than private condominiums in the same location.”
Indeed, private condominiums are not the only option for an HDB upgrader. PropNex’s Wong notes that a typical asset progression journey is from a four-room HDB flat to a larger HDB resale flat, an EC, or a private condominium.
“We think that typically, where budget permits, a four-room flat tends to be a good size for a first home for young households – providing sufficient space for couples who are planning to have kids. Some flat buyers may want to buy five-room flats, which are larger and will provide more space for remote working, and accommodate a hobby room and/or guest room, depending on their lifestyle,” she says.
PropertyGuru’s Singapore country manager Tan Tee Khoon suggests that for HDB flat owners who need more space, it makes more financial sense for them to purchase a resale flat. A million dollars will get them 1,200 sq ft, compared with 500 sq ft for a new OCR condominium.
Honey, I shrunk the apartment
The sweet spot for HDB upgraders used to be of an area of 1,200 square feet (sq ft) to 1,400 sq ft for new OCR condominiums. Since 2013, however, these buyers have increasingly been buying units that are almost half that size: 600 sq ft to 800 sq ft.
Among HDB dwellers who bought new OCR condominiums in 2022, 600 sq ft to 800 sq ft units formed the largest proportion of purchases at 38.4 per cent.
Among buyers of new OCR condominiums, 600 sq ft to 800 sq ft units made up 41.3 per cent of purchases in year to Mar 26. The proportion of HDB upgraders buying units of this size was 1.4 per cent in 2005. That year, 39.5 per cent of HDB upgraders picked apartments of 1,200 sq ft to 1,400 sq ft.
https://i.imgur.com/VDzc333.png
PropNex’s Wong notes that the general uptrend in new OCR condominium prices led to buyers purchasing units of a smaller size to maintain affordability on a price quantum basis. However, shrinking household size and more single-person households might also have possibly led buyers to “right-size” their homes.
The average price of 1,200 sq ft to 1,400 sq ft non-landed new condominiums in the suburbs bought by those with HDB addresses was S$665,261 in 2005. It rose to S$1.1 million in 2010 and breached the S$2 million mark in 2022.
The amount paid in 2005 for a 1,200 sq ft to 1,400 sq ft home would only have been enough for the smallest available new unit of 400 sq ft to 600 sq ft in 2016. By 2017, that amount was entirely insufficient for a new condominium.
The average price paid by HDB upgraders for a 400 sq ft to 600 sq ft new unit exceeded S$700,000 in 2017 and further jumped to S$1.1 million in 2022.
https://i.imgur.com/602av76.png
Using the Monetary Authority of Singapore’s consumer price index inflation calculator, the 2005 budget would be equivalent to about S$940,000 in 2022. This would not be enough to buy a new 400 sq ft to 600 sq ft unit.
The majority of HDB upgraders went for 1,200 sq ft to 1,400 sq ft resale condominium units in the OCR, during the period studied, although 1,000 sq ft to 1,200 sq ft units have been most in demand for the period since 2021.
https://i.imgur.com/Ce8cF5e.png
PropNex’s Wong notes that the average price paid for a resale OCR non-landed home (excluding ECs) has risen substantially over the years.
In 2005, the average price for 1,200 sq ft to 1,400 sq ft resale OCR condos came in at S$539,058. This crossed the S$1 million mark in 2011.
By 2022, a buyer with a budget of S$1 million would not have been able to afford a resale unit bigger than 800 sq ft in the OCR.
There was an uptick in demand for larger units in 2021 and 2022, though, as the pandemic lockdowns and ensuing work-from-home arrangements led many people to reassess their space requirements, Wong notes.
“The pandemic did not impact everyone equally. While hospitality and travel-related businesses took a bigger hit, many other sectors were less severely affected and professionals working in these sectors likely took the chance to enter the market. Interest rates were also much lower in 2021 and the first half of 2022 (before rising considerably from June onwards) compared to this year,” she adds.
https://i.imgur.com/LbmgBoy.png
In good time
All is not lost, however. Historical data shows measures introduced by the Government to cool the property market in 2012 and 2018 had the desired effect, while financial crises have a similar effect on property prices.
PropNex observed a sharp increase in the proportion of HDB dwellers buying new private OCR condominiums during the years following the global financial crisis: a 13.8 percentage point year-on-year jump in 2008 and 7.3 percentage point year-on-year rise in 2009.
Wong notes that the median price of OCR new non-landed homes fell by a cumulative 13 per cent in the first half of 2008 and by 15 per cent quarter on quarter (qoq) in the first quarter of 2009, which could have encouraged more upgraders to enter the market.
The median unit price for new sale OCR non-landed homes was S$837 psf in the first quarter of 2008 and S$620 psf in the first quarter of 2009.
There was a similar increase in buying activity in 2014, she says, which could be attributed to the fall in prices after the cooling measures in 2013.
That was the year the government introduced the TDSR and hiked the ABSD. This led to a 22.9 per cent q-o-q decline in the median unit price of OCR new non-landed homes in Q4 2013, which could have paved the way for more buying interest in 2014 among HDB upgraders.
Lim of ERA, however, says high interest rates and cooling measures may not be enough to push prices down this time, particularly as demand remains resilient. Rather, buyers are likely to be more discerning and rational in their decision-making.
Higher interest rates affect those buying resale more than those buying new launches, he adds.
PropertyGuru’s Dr Tan also expects prices to stay resilient as supply remains scarce. The declining inventory of new homes is not being replenished fast enough to meet the high demand.
“Developers facing impending ABSD deadlines with unsold units may offer attractive discounts to sell out. That said, developers with healthier financials may pay ABSD and buy time to sell their remaining units at market prices,” says Dr Tan.
https://www.businesstimes.com.sg/opinion-features/features/hdb-condo-upgrading-quest-has-become-more-challenging