http://www.businesstimes.com.sg/arch...units-20140424

Published April 24, 2014

Higher ratio of HDB dwellers goes for small private units

Those with private addresses bought mostly over-1,000 sq ft units in Q1

By Kalpana Rashiwala

[email protected] @KalpanaBT


[SINGAPORE] A larger proportion of private apartments and condos bought by those with HDB addresses in the first quarter were smaller units of up to 800 square feet, compared to buyers with private addresses, shows a caveats analysis by DTZ.

Buyers with HDB addresses acquired a total of 892 non-landed private homes in the first quarter of this year. Of these, 453 units or 51 per cent were for units of up to 800 sq ft, up from a 44 per cent share for the whole of last year. The proportion has been climbing steadily in recent years, from 25 per cent in 2010 to 32 per cent in 2011 and 36 per cent in 2012.

DTZ's South-east Asia chief operating officer Ong Choon Fah said: "Those with HDB addresses could be buying a higher proportion of smaller units as the investment sum is much smaller; it comes down to affordability and managing risks. Morever, if they buy from developers, they enjoy progressive payment terms i.e. they pay for the purchase price according to the phases of the project's physical completion. If they are buying for investment, they are unlikely to want to sell until after the project has been completed - as typically, you see a price spike just before a project receives Temporary Occupation Permit (TOP). Every little bit helps."

In contrast, only about 29 per cent of the 1,014 non-landed private homes bought by those with private addresses in Q1 this year were for units up to 800 sq ft. The bulk of their purchases, 59 per cent, involved units larger than 1,000 sq ft, up from a 54 per cent share for the whole of last year.

DTZ said the increase in the proportion of purchases of non-landed private homes up to 800 sq ft by buyers with HDB addresses is probably due to them being more active in the primary or developer sales market. In Q1 2014, about 65 per cent or 581 of the total 892 non-landed private homes (of all sizes) bought by those with HDB addresses were purchased in the primary market, that is, from developers.

Lee Lay Keng, regional head (SEA), research at DTZ, noted that developers have continued to mint a higher proportion of smaller units in new projects to keep overall price quantum affordable for buyers, in view of the total debt servicing ratio (TDSR) framework and earlier cooling measures.

"For those planning to invest, picking up a residential property from a developer at a new launch means that they enjoy the progressive payment scheme and yet can sell off the unit on receipt of TOP four years later, to avoid paying the seller's stamp duty," she added.

Put another way, of the total of 750 units of up to 800 sq ft transacted in Q1 2014, 453 units or 60 per cent were acquired by those living in HDB flats and 40 per cent by those with private addresses. It was the reverse situation for bigger units (above 1,000 sq ft). Buyers with private addresses mopped up 66 per cent of the 911 units in this size category that were sold in Q1, with purchasers with HDB addresses picking up the balance 34 per cent.

Market watchers expect small private apartments/condos to continue to be highly sought after by HDB dwellers and likewise expect developers to continue building a high proportion of such units to cater to buyers sensitive about lump-sum pricing.

"At most new launches these days, typically the smaller units - the one and two-bedders - sell the fastest," observed Mrs Ong.

Chesterton Singapore managing director Donald Han estimates that about two-thirds of HDB upgraders would be living in three or four-room HDB flats and their preferred investment in the private segment would be units less than 800 sq ft, that is, one or two-bedders - in line with their affordablility.

"Some may be buying private homes for owner occupation while keeping their HDB flats to lease out as a longer-term investment, given that net rental yields are higher for HDB flats at about 4 to 5 per cent compared to 3 to 4 per cent for private apartments.

"However, things may start to change this year if the deceleration in HDB resale prices gathers momentum. Then two things could happen. First, the wealth effect will start to diminish and some HDB dwellers may no longer wish to upgrade. Second, those in five-room HDB flats, who might previously have bought a two or three-bedder private condo, may instead opt for a one or two-bedder condo. So the signs point to continued demand for small units."