New Reporter
16-10-23, 17:59
Stay cool and don’t go overboard chasing after million-dollar HDB flats
Oct 16, 2023
SOME Housing and Development Board (HDB) flats are pricey, fetching well over S$1 million in the resale market.
Around 128 flats changed hands in the third quarter for over S$1 million each, marking a record high for a quarter. The number of million-dollar HDB flat transactions in 2023 looks set to reach a new high.
The lofty prices paid for highly sought-after resale flats comes on the back of a run-up in HDB resale prices post-pandemic.
https://i.imgur.com/46h750b.png
There are good reasons to pay top dollar for choice HDB resale flats. One may get a flat in the city centre or a popular mature estate with good amenities. Or a spacious home of possibly over 1,200 square feet or a flat with great views.
Crucially, one saves lots of money when buying a sought-after resale flat versus a leasehold private condominium unit.
A comparable resale condo home in the vicinity may cost over 80 per cent more than an HDB four-room, five-room or executive flat that sells for over a million dollars in the resale market.
For some buyers, the million-dollar or more resale flats that are being transacted today are attractive because these flats come with fewer restrictions versus many new HDB homes that will be built in popular locations.
New framework
HDB will remove its current classification by mature and non-mature estates. Starting from the second half of 2024, it will designate build-to-order (BTO) projects as Standard, Plus or Prime, based on locational attributes.
Prime flats will fall under the existing Prime Location Housing (PLH) model and be built in the most prime central locations, such as the Greater Southern Waterfront. Plus flats are a new category and will be built in popular mature towns such as Bishan, Bukit Merah, Kallang/Whampoa, Queenstown and Toa Payoh.
Plus, Prime and PLH units come with tighter restrictions than other HDB flats. For example, the minimum occupation period (MOP) for Plus, Prime and PLH units is 10 years versus five years for other HDB flats.
While eligible permanent resident (PR) households can buy other resale flats, they cannot buy Plus, Prime and PLH resale units. An income ceiling applies to buyers of resale Plus, Prime and PLH units, but not other resale flats.
Also, renting out of an entire Plus, Prime or PLH flat at any time is not allowed, whereas with other HDB flats, an entire unit can be rented out post-MOP.
Given the above restrictions, Plus, Prime and PLH flats could fetch more muted prices in the resale market.
However, buyers looking to stump up for large resale units at popular HDB projects, which come with fewer restrictions versus Plus, Prime and PLH units, such as The Pinnacle @ Duxton, The Peak @ Toa Payoh, Natura Loft in Bishan and Sky Terrace @ Dawson, should consider the below factors.
First, buyers hunting for resale HDB homes in popular locations will in future have Plus, Prime and PLH flats that are more affordably priced to consider. The constraint on financial gains from buying an HDB resale flat with tighter restrictions may be mitigated by lower entry price.
Moreover, as the public transport network expands, more decentralised office locations emerge and amenities in many areas improve, the relative premium fetched by popular HDB estates may shrink.
Further-flung estates can get a boost if more established schools follow the lead of Anglo-Chinese School (Primary), which is moving from Newton to Tengah.
Land lease decay
Second, buyers paying top dollar for HDB resale flats should be mindful of the risk of land lease decay.
Based on the Singapore Land Authority’s table, a land lease of 99 years, 75, years, 50 years and 25 years has 96 per cent, 88.5 per cent, 74.7 per cent and 54.6 per cent of that of freehold value respectively.
In short, the annual depreciation on a straight line basis of a 99-year leasehold HDB flat is about 0.3 per cent over the first 24 years, 0.6 per cent over the next 25 years, 0.8 per cent over the subsequent 25 years and 2.2 per cent over the final 25 years.
While a leasehold condo development faces the same risk as HDB flats of land lease running down to zero eventually, there are numerous precedents of older private leasehold housing developments being sold en bloc for redevelopment, thereby netting hefty gains for the owners.
The fate of older HDB developments may be less clear. Only about 5 per cent percent of all HDB flats are suitable for redevelopment under the Selective En bloc Redevelopment Scheme (Sers), and most of the projects with high redevelopment potential have already been selected for the scheme.
Selected HDB precincts could be offered the Voluntary Early Redevelopment Scheme (Vers) when flats are 70 years or older. However, while many details on Vers have yet to be shared, terms offered under Vers will be less generous than Sers.
Retirees
Third, some HDB resale buyers with strong buying power may lean towards resale Plus, Prime and PLH units in future. For example, a local retiree couple flat-hunting in Toa Payoh might choose a Plus resale unit in the estate over The Peak @ Toa Payoh because the former has longer land lease remaining and possibly more attractive pricing as the said couple is not competing with households earning over the income ceiling or PR households.
The said couple could be eyeing a home to live out the rest of their lives and thus be unfazed by a 10-year MOP.
As the population ages, the Singaporean senior – who is armed with proceeds from divesting a private home or a prized HDB home – can be a growingly important demographic in the HDB resale market. This demographic may see greater value in the resale market with buying Plus, Prime and PLH units over other options.
The Pinnacle @ Duxton is uniquely designed, sits on a historically significant site and enjoys a prime central location. Doubtless, many people will be happy to pay up to live in such a development, even as the years of land lease remaining dwindle. Also, any buyer would prefer owning a home with fewer restrictions, such as one that can be resold within a shorter time frame or rented out whole at some point.
Nevertheless, there is no need to frenziedly pursue existing sought-after HDB homes. Buyers with varying needs will have an ample range of choices in the HDB resale market in the years ahead.
https://www.businesstimes.com.sg/opinion-features/stay-cool-and-dont-go-overboard-chasing-after-million-dollar-hdb-flats
Oct 16, 2023
SOME Housing and Development Board (HDB) flats are pricey, fetching well over S$1 million in the resale market.
Around 128 flats changed hands in the third quarter for over S$1 million each, marking a record high for a quarter. The number of million-dollar HDB flat transactions in 2023 looks set to reach a new high.
The lofty prices paid for highly sought-after resale flats comes on the back of a run-up in HDB resale prices post-pandemic.
https://i.imgur.com/46h750b.png
There are good reasons to pay top dollar for choice HDB resale flats. One may get a flat in the city centre or a popular mature estate with good amenities. Or a spacious home of possibly over 1,200 square feet or a flat with great views.
Crucially, one saves lots of money when buying a sought-after resale flat versus a leasehold private condominium unit.
A comparable resale condo home in the vicinity may cost over 80 per cent more than an HDB four-room, five-room or executive flat that sells for over a million dollars in the resale market.
For some buyers, the million-dollar or more resale flats that are being transacted today are attractive because these flats come with fewer restrictions versus many new HDB homes that will be built in popular locations.
New framework
HDB will remove its current classification by mature and non-mature estates. Starting from the second half of 2024, it will designate build-to-order (BTO) projects as Standard, Plus or Prime, based on locational attributes.
Prime flats will fall under the existing Prime Location Housing (PLH) model and be built in the most prime central locations, such as the Greater Southern Waterfront. Plus flats are a new category and will be built in popular mature towns such as Bishan, Bukit Merah, Kallang/Whampoa, Queenstown and Toa Payoh.
Plus, Prime and PLH units come with tighter restrictions than other HDB flats. For example, the minimum occupation period (MOP) for Plus, Prime and PLH units is 10 years versus five years for other HDB flats.
While eligible permanent resident (PR) households can buy other resale flats, they cannot buy Plus, Prime and PLH resale units. An income ceiling applies to buyers of resale Plus, Prime and PLH units, but not other resale flats.
Also, renting out of an entire Plus, Prime or PLH flat at any time is not allowed, whereas with other HDB flats, an entire unit can be rented out post-MOP.
Given the above restrictions, Plus, Prime and PLH flats could fetch more muted prices in the resale market.
However, buyers looking to stump up for large resale units at popular HDB projects, which come with fewer restrictions versus Plus, Prime and PLH units, such as The Pinnacle @ Duxton, The Peak @ Toa Payoh, Natura Loft in Bishan and Sky Terrace @ Dawson, should consider the below factors.
First, buyers hunting for resale HDB homes in popular locations will in future have Plus, Prime and PLH flats that are more affordably priced to consider. The constraint on financial gains from buying an HDB resale flat with tighter restrictions may be mitigated by lower entry price.
Moreover, as the public transport network expands, more decentralised office locations emerge and amenities in many areas improve, the relative premium fetched by popular HDB estates may shrink.
Further-flung estates can get a boost if more established schools follow the lead of Anglo-Chinese School (Primary), which is moving from Newton to Tengah.
Land lease decay
Second, buyers paying top dollar for HDB resale flats should be mindful of the risk of land lease decay.
Based on the Singapore Land Authority’s table, a land lease of 99 years, 75, years, 50 years and 25 years has 96 per cent, 88.5 per cent, 74.7 per cent and 54.6 per cent of that of freehold value respectively.
In short, the annual depreciation on a straight line basis of a 99-year leasehold HDB flat is about 0.3 per cent over the first 24 years, 0.6 per cent over the next 25 years, 0.8 per cent over the subsequent 25 years and 2.2 per cent over the final 25 years.
While a leasehold condo development faces the same risk as HDB flats of land lease running down to zero eventually, there are numerous precedents of older private leasehold housing developments being sold en bloc for redevelopment, thereby netting hefty gains for the owners.
The fate of older HDB developments may be less clear. Only about 5 per cent percent of all HDB flats are suitable for redevelopment under the Selective En bloc Redevelopment Scheme (Sers), and most of the projects with high redevelopment potential have already been selected for the scheme.
Selected HDB precincts could be offered the Voluntary Early Redevelopment Scheme (Vers) when flats are 70 years or older. However, while many details on Vers have yet to be shared, terms offered under Vers will be less generous than Sers.
Retirees
Third, some HDB resale buyers with strong buying power may lean towards resale Plus, Prime and PLH units in future. For example, a local retiree couple flat-hunting in Toa Payoh might choose a Plus resale unit in the estate over The Peak @ Toa Payoh because the former has longer land lease remaining and possibly more attractive pricing as the said couple is not competing with households earning over the income ceiling or PR households.
The said couple could be eyeing a home to live out the rest of their lives and thus be unfazed by a 10-year MOP.
As the population ages, the Singaporean senior – who is armed with proceeds from divesting a private home or a prized HDB home – can be a growingly important demographic in the HDB resale market. This demographic may see greater value in the resale market with buying Plus, Prime and PLH units over other options.
The Pinnacle @ Duxton is uniquely designed, sits on a historically significant site and enjoys a prime central location. Doubtless, many people will be happy to pay up to live in such a development, even as the years of land lease remaining dwindle. Also, any buyer would prefer owning a home with fewer restrictions, such as one that can be resold within a shorter time frame or rented out whole at some point.
Nevertheless, there is no need to frenziedly pursue existing sought-after HDB homes. Buyers with varying needs will have an ample range of choices in the HDB resale market in the years ahead.
https://www.businesstimes.com.sg/opinion-features/stay-cool-and-dont-go-overboard-chasing-after-million-dollar-hdb-flats