HDB resale, mid-segment private home prices seen narrowing
Published March 28, 2007
HDB resale, mid-segment private home prices seen narrowing
SC Global's Simon Cheong expects HDB resale values to appreciate
By KALPANA RASHIWALA
(SINGAPORE) High-end developer Simon Cheong predicts that the price gap between HDB resale flats and the mid-segment of the private housing market will narrow over the next three years as HDB flat values appreciate.
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"The high-end market defies economic theory. It's a luxury item, very emotional purchase . . . well-heeled international buyers that we are trying to attract to Singapore will use Singapore as a ""six-star hotel''.'
- Mr Cheong
The HDB segment, which houses the vast majority of Singapore's population, is currently 'undervalued'. And a price gain will be driven by the higher quality of public housing, he reckons.
But there will be no slowdown in the near future in the price appreciation for luxury homes as Singapore continues to draw international investors as it positions itself as a global city, he said in a recent interview with BT, speaking in his capacity as listed SC Global Developments chairman and CEO.
'The high-end market defies economic theory. It's a luxury item, very emotional purchase. As Singapore shapes up as a global city, well-heeled international buyers that we are trying to attract to Singapore will use Singapore as a 'six-star hotel', if you like.
'This breed of global rich are buying super-prime properties in major cities, even if they occupy them just for a few weeks in a year. They'd rather keep their apartments empty the rest of the year than rent them - to maintain their exclusivity. It's a different group of people,' Mr Cheong says.
He defines the high-end or luxury housing market as homes priced at about $3,000 psf currently, and mid-segment private homes as those selling for about $1,000 psf.
The price gap between the high-end/luxury and mid-market tiers of the private housing sector is set to widen, and certainly the gap between the luxury and HDB resale flat prices will also increase.
But Mr Cheong does not find this widening gap unique to Singapore, as it is common to global cities. It is not a social issue, as luxury homes - for all their hype - are a very small percentage of homes in any property market, he reasons. 'Frankly, the luxury property segment is not even on their (HDB upgraders') radar screen, it's not something that will bother the masses.'
While some market watchers see the declining share of HDB upgraders among private home buyers as a sign that they are being priced out of the private housing market because of rising prices at property launches, Mr Cheong offers a different perspective: 'Frankly, I'm not surprised. All it tells you is that the HDB quality has improved and it's less compelling to move to a private home.
'Don't forget, our HDB flats are among the best public housing in the world and probably the equivalent of many countries' high-end housing.'
Mr Cheong adds: 'The gap between HDB and private has already narrowed in terms of quality and space/layout. Many upgraded HDB estates are as good as private estates. In Singapore, HDB is the most affordable housing but it's also of very high quality. There is going to be less and less product differentiation between HDB and private.
'The bottom line is, HDB flats are probably undervalued today and this means there's a strong chance of appreciation in the next few years.'
So the narrowing of the price gap between HDB flats and mid-segment private homes that Mr Cheong predicts will take place over the next three years will happen not because the prices of mid-market homes will come down but more because HDB prices will go up.
He thinks that 'many Singaporeans are finding that buying a HDB resale flat and sprucing it up is still cheaper (than buying private)'.
'It makes sense. I think that is going to be the trend. HDB values will go up.'
Demand for HDB resale flats will also receive a boost from some segments of the new foreign talent Singapore is wooing from the region - highly qualified people from China or India.
Mid-tier private homes will benefit from demand for replacement homes by those who have sold their prime district homes through en bloc sales. 'Many of the en bloc sellers are ageing, and may not need the same-sized, say 2,600 sq ft, apartment to replace the one they're selling. For the square footage they are giving up in buying a smaller new home, they're moving to a more efficient apartment, with a better lifestyle.'
The mid-market private housing segment should also benefit from the inflow of new expatriates into Singapore.
Re: HDB resale, mid-segment private home prices seen narrowing
I agree that luxury segment will stay up. It is like how you'll buy a Lambo or a Ferrari or an SLR. Economic value is not a consideration, just like the fact that a Ferrari depreciates by more than $40k a year is not an issue.
However I disagree with Simon Cheong that mid-tier will hold steady or go up significantly more. Mid-tier: $1000psf to $2000psf. Currently the mid-tier craze is also fuelled by the enbloc craze. In 3 to 5 years time when every enbloc'ed mid-tier launch TOPs, supply will outstrip demand - I believe this is a foregone conclusion that everyone here has. Take Farrer Road for example. Do you know how many potential new units there are along that road alone? If enbloc is successful, the Farrer Court plot alone will already have more than 1000 units.
Even worse is if what he says is true, that public perception is that HDB flats are now able to rival condos in terms of quality. Then most low-tier suburban condo and HDB people will not be willing to pay $1000psf to $2000psf to upgrade to mid-tier, which is the segment most of D9, 10, 11 are in except for the few luxury hotspots that command >$3000psf. They will be fine where they are. Many people I know see no real value in paying $1000psf to $2000psf to move to D10 and D11 except for the "within 1km primary school" factor. Even the "prestige" vanity factor doesn't appeal to many Singaporeans anymore, not when the price is this high.
Influx of 2 million new Singaporeans and expatriates. If the bulk is from China, India and SE Asia, then I think most of them would opt for HDB. Like the existing Singaporeans, they see no compelling need to buy and live in D9, 10, 11 mid-tier condo homes if the prestige factor and elite schools are not important considerations. The super rich among the Asian immigrants/expats will bypass mid-tier totally and head for the luxury condos or even GCBs.
Western expats will probably rent mid-tier because of proximity to expat enclaves, but will not buy. Cos when supply > demand it will be a tenant's market again, ie: rents go down.
So again it is the mid-tier that gets squeezed because they are neither here nor there.
Re: HDB resale, mid-segment private home prices seen narrowing
I guess the mid-tier's only hope of getting customers other than the displaced en-bloc victims is through overseas launches in HK and Jakarta.
Lippo has got the right idea, selling out Newton One and The Trillium (almost sold out) to their base of Indonesian and HK customers, achieving close to $2000 psf prices for the Trillium.
MCL has also done that with Waterfall Gardens on Farrer Road (achieving an average of $1600psf), and Wing Tai is probably already doing the same with their freehold Kallang Riverside project The Riverine ($1200 psf!!!). I guess it is easier to sell when your customers are foreign and don't know what's really around the area. Keppel Land doing that as well with Reflections. The architect's name alone will sell this project, no problem, coupled with the fact that it is near IR. 99 year leasehold? Only Singaporeans will quibble with this. Isn't everything in HK leasehold?
Re: HDB resale, mid-segment private home prices seen narrowing
A good segment of private property to buy now is the low end private segment, where prices are less than $400 psf and the location is near MRT and amenities. These units generate very good yields and can really sustain the monthly installment. Some examples are Parc Vista, Parc Oasis and Lakepoint Condo. There are probably some others in the east or north but I am only familiar with the west area.
Re: HDB resale, mid-segment private home prices seen narrowing
Quote:
Originally Posted by fatbastardx
Even worse is if what he says is true, that public perception is that HDB flats are now able to rival condos in terms of quality. Then most low-tier suburban condo and HDB people will not be willing to pay $1000psf to $2000psf to upgrade to mid-tier, which is the segment most of D9, 10, 11 are in except for the few luxury hotspots that command >$3000psf. They will be fine where they are. Many people I know see no real value in paying $1000psf to $2000psf to move to D10 and D11 except for the "within 1km primary school" factor. Even the "prestige" vanity factor doesn't appeal to many Singaporeans anymore, not when the price is this high.
This is a fearsome thought. Like you, I cannot forsee demand for mid-tier increasing substantially. The most optimistic scenario will be people who have enbloc their mid-tier homes in 9, 10, 11 pay a bit more to move back within the vicinity. But other than these enbloc people, from where is the new demand for mid-tier coming in? Will there even be new demand? My feeling is, no.
Re: HDB resale, mid-segment private home prices seen narrowing
Quote:
Originally Posted by Madeira
A good segment of private property to buy now is the low end private segment, where prices are less than $400 psf and the location is near MRT and amenities. These units generate very good yields and can really sustain the monthly installment. Some examples are Parc Vista, Parc Oasis and Lakepoint Condo. There are probably some others in the east or north but I am only familiar with the west area.
Even better suggestion will be to invest in a resale HDB at the city fringes or in the city area. Bugis, Chinatown, Bukit Ho Swee, Tekka, Farrer Park, Boon Keng, Kallang, Geylang, Toa Payoh, Redhill, Tiong Bahru, Queenstown, Commonwealth, Dover, Marine Parade. These are limited in supply but very huge demand. And with new immigrants coming in, the demand will be even higher.
During the last property boom, resale HDB flats in city fringe areas hit record price of $700K.(correct me if I am wrong?) Now they are around $300K to $400K for 5 room and prices have already risen quite a bit for the 4 rooms. So 5 room HDB resale is currently a good buy, imo.
Re: HDB resale, mid-segment private home prices seen narrowing
Quote:
Originally Posted by ahlahdin
Even better suggestion will be to invest in a resale HDB at the city fringes or in the city area. Bugis, Chinatown, Bukit Ho Swee, Tekka, Farrer Park, Boon Keng, Kallang, Geylang, Toa Payoh, Redhill, Tiong Bahru, Queenstown, Commonwealth, Dover, Marine Parade. These are limited in supply but very huge demand. And with new immigrants coming in, the demand will be even higher.
During the last property boom, resale HDB flats in city fringe areas hit record price of $700K.(correct me if I am wrong?) Now they are around $300K to $400K for 5 room and prices have already risen quite a bit for the 4 rooms. So 5 room HDB resale is currently a good buy, imo.
Good idea to invest in a 5 room or executive HDB unit. But the problem is that u r not allow to rent out the unit for the first 3 years. So have to stay in.
