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.
"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.