Older resale flats favoured, thanks to their larger size and greater affordability

Jan 05, 2023

THE proportion of older flats sold in 2022 has more than doubled over the last decade, reflecting the demand for larger and more affordable resale flats, especially in the last few years.

Data compiled for The Business Times by Cushman & Wakefield Research shows that the number of older flats sold as a proportion of all resale Housing and Development Board (HDB) flat types jumped from 15 per cent in 2012 to 37 per cent in 2022, based on latest available data as at Dec 29.

The HDB resale flats were divided into three groups:

The oldest flats with remaining leases of 44 to 65 years;
The middle group with 66 to 85 years of lease left; and
The newest units with more than 85 years of lease to go.



Based on data starting in 2012, the oldest flats sold had about 44 years of lease left.

Wong Xian Yang, head of research at Cushman & Wakefield, noted that the available stock for sale is ageing.

“HDB flats are on 99-year leases, and only a small minority undergo the Selective En bloc Redevelopment Scheme (Sers), so the average remaining lease of HDB flats would go down over time,” he said. Sers is part of the government’s efforts to renew older housing estates, and residents involved are offered new HDB flats nearby with a fresh 99-year lease while the old sites are redeveloped.

Wong said demand has been gravitating towards more affordable flats. Like for like, older flats tend to cost less due to their age and shorter remaining lease. With people doing some combination of working from home and from the office, older homes – which tend to be larger than newer ones – have become more appealing.

The data also shows a distinct drop in transactions involving resale flats with 66-85 years of lease left. One reason is the migration over time of such flats into the oldest category.

Other reasons, said Wong, could be higher demand for newer flats because of concerns over capital value decline due to lease decay, as well as a larger supply of newer flats for sale, given that a crop of such homes came on the market upon reaching their Minimum Occupation Period (MOP).

These are also likely the reasons why the proportion of newer flats sold with remaining leases of above 85 years rose steadily to hit 30 per cent this year, after having fallen from 26 per cent in 2012 to between 17 and 19 per cent from 2014 to 2018.

“With rising HDB resale prices and a stable labour market, aspiring HDB upgraders could have been incentivised to sell their flat after the MOP and upgrade,” said Wong.

When the numbers are broken down by whether the transactions took place in mature versus non-mature estates, it would appear that the proportion of resale flats from both categories have remained largely stable over the past 11 years. Resale flat transactions in mature estates have ranged from 41 per cent to 48 per cent; those from non-mature estates accounted for between 52 per cent and 59 per cent.



The data shows that the proportion of older resale flats sold in mature estates has doubled from 29 per cent to 58 per cent since 2012.

Meanwhile, transactions of resale flats with 66 to 85 years left on their leases more than halved from 62 per cent to 25 per cent in that period.

The newest flats doubled their proportion of all mature estate resale flat transactions from 9 per cent to 18 per cent.



Similarly, in non-mature estates, the proportion of older resale flats sold grew from a low base of 3 per cent in 2012 to 23 per cent last year. The proportion of those with remaining leases of 66 to 85 years fell from 58 per cent to 38 per cent.

The proportion of the newest resale flats transacted in non-mature estates fell from 39 per cent in 2012 to 23 per cent between 2015 and 2018; the figure then rose to 41 per cent in 2021, and came down slightly to 39 per cent last year.

More often than not, newer resale flats in the non-mature estates are more affordable than their counterparts in mature estates, noted Wong.



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