New Reporter
21-08-23, 10:34
HDB changes may divert demand to existing resale flats, shrink upgrader pool for private housing: analysts
Aug 21, 2023
THE Housing and Development Board’s (HDB) new framework for Build-to-Order (BTO) flats has been a long time coming, but could drive demand to existing flats and eat into the private housing market’s pool of upgraders, analysts said.
Announced by Prime Minister Lee Hsien Loong during his National Day Rally on Sunday (Aug 20), the framework differentiates BTO projects by locational attributes rather than age of estate. It aims to provide more affordable new flats in attractive locations, and reduce the windfall gains that come with the high resale prices of flats in mature estates.
The introduction of Plus flats, a new classification for desirable locations near transport nodes or town centres, will come with more subsidies but with tight curbs on resale.
Plus flats will have the same 10-year minimum occupation period (MOP) as the current Prime Location Housing Model projects, which will be called Prime flats. Standard flats will retain the current 5-year MOP. Resale of Plus flats will further be subject to an income ceiling, a criteria for Prime flat resale too.
The mature versus non-mature estate distinction may have outlived its usefulness, with prices of resale flats in non-mature estates now approaching those of mature estates, said Huttons’ senior director of data analytics, Lee Sze Teck.
The classification began in 1992 and depended on availability of land for development. Estates such as Choa Chu Kang, Jurong West, Sengkang and Woodlands were designated non-mature, while others such as Ang Mo Kio, Clementi, Marine Parade and Serangoon were designated mature.
Data from HDB showed that in the second quarter of 2023, median resale prices of four-room flats in Sengkang and Serangoon were around S$560,000. This was higher than that of a four-room resale flat in Ang Mo Kio, which stood at S$520,000.
An analysis by OrangeTee & Tie showed that 17 out of 26 HDB towns hit record prices this year. Resale prices escalated from 2020, when they rose 5 per cent compared to 0.1 per cent in 2019.
The HDB market continued to heat up from 2021, with resale prices shooting up 12.7 per cent, then rising another 10.4 per cent in 2022. Prices have cooled since then with the introduction of tighter loan limits, showing a 1 per cent rise in Q1 and 1.4 per cent in Q2.
Nicholas Mak, chief research officer at Mogul.sg, anticipates a jump in demand for existing flats.
“It is possible that going forward, the government would not build five-room flats in BTO projects at Plus and Prime locations,” he said, noting the lack of such flats in newer central projects such as at the Greater Southern Waterfront. “That would mean five-room flats, especially well-located ones, would become an endangered species.”
“Existing five-room resale flats would also come with the relatively shorter five-year MOP,” said Mak. “As a result, demand for such flats could rise, despite their age. This could contribute to the rise in their prices.”
The longer 10-year MOP might also have a knock-on effect in private housing, Mak said.
Like with PLH projects, buyers now have to wait for 14 to 15 years, from the time of application to the end of the MOP, to sell their Plus flats. This could make it difficult for families to “climb up the next step of the property ladder”.
The longer MOP might temper speculation, said Christine Sun, senior vice-president at OrangeTee & Tie.
Government data showed that the number of flats sold within two years of MOP, aged seven years or less, ballooned 733 per cent to 6,189 units in 2022, from 743 in 2014. They now account for a larger proportion of total resale transactions – from 4.6 per cent in 2014 to 23.2 per cent last year.
In 2022, they made up 17 per cent, or 63 units, of million-dollar deals.
In any case, some homebuyers may well stay away from Plus flats, given the restrictions that come with it, said Lee Nai Jia, PropertyGuru’s head of real estate intelligence, data and software solutions. This is likely to result in some applicants gravitating towards Standard flats.
Lee believes the launch of Plus and Prime flats might have a smaller impact on the resale market than anticipated, since most potential homebuyers are “propelled by immediate requirements” and macroeconomic factors. A flood of BTO supply and high resale prices have already siphoned demand from the resale segment.
Huttons’ Lee said the new scheme could see “BTO applicants trying to game the system and guess the location” before the new taxonomy kicks in next year. “They may then apply for BTO flats which are nearby and have no restrictions.”
https://www.businesstimes.com.sg/property/hdb-changes-may-divert-demand-existing-resale-flats-shrink-upgrader-pool-private-housing
Aug 21, 2023
THE Housing and Development Board’s (HDB) new framework for Build-to-Order (BTO) flats has been a long time coming, but could drive demand to existing flats and eat into the private housing market’s pool of upgraders, analysts said.
Announced by Prime Minister Lee Hsien Loong during his National Day Rally on Sunday (Aug 20), the framework differentiates BTO projects by locational attributes rather than age of estate. It aims to provide more affordable new flats in attractive locations, and reduce the windfall gains that come with the high resale prices of flats in mature estates.
The introduction of Plus flats, a new classification for desirable locations near transport nodes or town centres, will come with more subsidies but with tight curbs on resale.
Plus flats will have the same 10-year minimum occupation period (MOP) as the current Prime Location Housing Model projects, which will be called Prime flats. Standard flats will retain the current 5-year MOP. Resale of Plus flats will further be subject to an income ceiling, a criteria for Prime flat resale too.
The mature versus non-mature estate distinction may have outlived its usefulness, with prices of resale flats in non-mature estates now approaching those of mature estates, said Huttons’ senior director of data analytics, Lee Sze Teck.
The classification began in 1992 and depended on availability of land for development. Estates such as Choa Chu Kang, Jurong West, Sengkang and Woodlands were designated non-mature, while others such as Ang Mo Kio, Clementi, Marine Parade and Serangoon were designated mature.
Data from HDB showed that in the second quarter of 2023, median resale prices of four-room flats in Sengkang and Serangoon were around S$560,000. This was higher than that of a four-room resale flat in Ang Mo Kio, which stood at S$520,000.
An analysis by OrangeTee & Tie showed that 17 out of 26 HDB towns hit record prices this year. Resale prices escalated from 2020, when they rose 5 per cent compared to 0.1 per cent in 2019.
The HDB market continued to heat up from 2021, with resale prices shooting up 12.7 per cent, then rising another 10.4 per cent in 2022. Prices have cooled since then with the introduction of tighter loan limits, showing a 1 per cent rise in Q1 and 1.4 per cent in Q2.
Nicholas Mak, chief research officer at Mogul.sg, anticipates a jump in demand for existing flats.
“It is possible that going forward, the government would not build five-room flats in BTO projects at Plus and Prime locations,” he said, noting the lack of such flats in newer central projects such as at the Greater Southern Waterfront. “That would mean five-room flats, especially well-located ones, would become an endangered species.”
“Existing five-room resale flats would also come with the relatively shorter five-year MOP,” said Mak. “As a result, demand for such flats could rise, despite their age. This could contribute to the rise in their prices.”
The longer 10-year MOP might also have a knock-on effect in private housing, Mak said.
Like with PLH projects, buyers now have to wait for 14 to 15 years, from the time of application to the end of the MOP, to sell their Plus flats. This could make it difficult for families to “climb up the next step of the property ladder”.
The longer MOP might temper speculation, said Christine Sun, senior vice-president at OrangeTee & Tie.
Government data showed that the number of flats sold within two years of MOP, aged seven years or less, ballooned 733 per cent to 6,189 units in 2022, from 743 in 2014. They now account for a larger proportion of total resale transactions – from 4.6 per cent in 2014 to 23.2 per cent last year.
In 2022, they made up 17 per cent, or 63 units, of million-dollar deals.
In any case, some homebuyers may well stay away from Plus flats, given the restrictions that come with it, said Lee Nai Jia, PropertyGuru’s head of real estate intelligence, data and software solutions. This is likely to result in some applicants gravitating towards Standard flats.
Lee believes the launch of Plus and Prime flats might have a smaller impact on the resale market than anticipated, since most potential homebuyers are “propelled by immediate requirements” and macroeconomic factors. A flood of BTO supply and high resale prices have already siphoned demand from the resale segment.
Huttons’ Lee said the new scheme could see “BTO applicants trying to game the system and guess the location” before the new taxonomy kicks in next year. “They may then apply for BTO flats which are nearby and have no restrictions.”
https://www.businesstimes.com.sg/property/hdb-changes-may-divert-demand-existing-resale-flats-shrink-upgrader-pool-private-housing