Fewer HDB upgraders buying private homes suggests more are priced out

Published: Jan 31, 2024 by 
PropertyGiant Singapore
Buyers may stay on the sidelines as they evaluate the options and wait for prices to moderate further. PHOTO: CDL
Buyers may stay on the sidelines as they evaluate the options and wait for prices to moderate further. PHOTO: CDL

Fewer Housing Board flat upgraders made the leap into private housing for a second straight year as resale flat price growth and the volume of HDB resale transactions tapered, while private home prices and mortgage rates remain high.

This could have implications for the overall market, in particular the suburban market – which is popular with HDB upgraders – as more than 4,400 new condos are expected to be launched in the suburbs in 2024, according to OrangeTee & Tie.

This would account for around 50 per cent of the up to 8,800 new units expected to be launched in the year, the real estate agency estimated.

With Singapore’s private residential prices growing at a slower pace and up to 40 new launches coming onstream in 2024, buyers may stay on the sidelines as they evaluate the options and wait for prices to moderate further.

Already, signs of price resistance have set in as new private home sales, excluding executive condominiums (ECs), sank to a 15-year low of 6,421 units in 2023, even as the number of newly launched units that year jumped to 7,551 units from 4,528 units in 2022.

And while demand from local owner-occupiers for suburban non-landed homes and new launches have fuelled a price rally in this submarket – like J’den in Jurong East which set a benchmark record at $2,451 per sq foot (psf) – observers question how long this will last.

Tellingly, the number of HDB upgraders acquiring new and resale private homes has dropped in recent years.

A total of 4,714 new and resale non-landed private homes were bought by those with HDB addresses in 2023, down 25.7 per cent from 6,344 in 2022.

Transactions were down 36.3 per cent in 2022 from 9,960 in 2021, said PropNex, citing the Urban Redevelopment Authority’s (URA) Realis data.

In comparison, a total of 9,795 new and resale non-landed private homes were bought by those with private addresses, down 15.3 per cent from 2022’s 11,562, which was down 31.3 per cent from 16,822 in 2021.

For the non-landed resale market, more buyers with HDB addresses appear to be delaying their upgrading plans in hopes of mortgage rates moderating, as the average transacted price of resale homes ticked up to nearly $1.8 million in 2023 from $1.76 million in 2022, PropNex chief executive Ismail Gafoor said.

Trading up is getting harder for HDB upgraders as the growth in resale flat prices has not kept pace with that of private residential property prices in 2023.

Ms Chia Siew Chuin, JLL’s head of residential research for Singapore, attributed the drop in private home sales to buyers with HDB addresses to slower resale flat price growth following the ramp-up in the supply of Build-To-Order flats and recent rounds of cooling measures.

Compared with a 10.4 per cent jump in 2022, HDB resale flat prices gained just 4.9 per cent in 2023. Private residential property prices grew 6.8 per cent in 2023, compared with 8.6 per cent in 2022.

As a result, some buyers with HDB addresses may sit it out in hopes of lower interest rates in the second half of 2024, or switch to new executive condominiums (ECs), priced at around $1,406 psf in 2023, according to Huttons – a 34 per cent discount to new suburban private property prices.

But even new EC launches have seen slower take-up rates over the past year, as new unit prices rose amid low unsold supply, said Mr Nicholas Mak, chief research officer of property search portal Mogul.sg

When Copen Grand EC in Tengah Garden Walk was launched in October 2022, 73 per cent of its 639 units were sold at an average price of $1,300 psf over the launch weekend.

Three months later, Tenet in Tampines Street 62 sold 72 per cent of its 618 units at an average price of $1,360 psf.

In August 2023, Altura in Bukit Batok moved 61 per cent of its 360 units at an average price of $1,433 psf during its launch.

Six months later, Lumina Grand, the sole EC launch in 2024, sold about 53 per cent, or 269, of its 512 units at its launch on Jan 27 at an average price of $1,464 psf after an early bird discount of $8,000.

New condo prices in the suburbs, in comparison, have surged past the $2,000 psf benchmark in recent months due to limited new supply. In 2023, prices in this submarket jumped the most – 13.7 per cent – the highest annual increase since 2010.

In recent years, new suburban condo supply has been limited, with an average of 3,495 units launched annually from 2019 to 2023. This compared with an average of 9,860 units launched annually from 2009 to 2013, according to OrangeTee & Tie.

But the addition of more than 4,400 new suburban condo units could slow price growth in this submarket in 2024, it said.

Upcoming suburban launches include the 440-unit Sora in Yuan Ching Road, the 533-unit Lentor Mansion, and the 345-unit Government Land Sales site in Champions Way in Woodlands awarded to City Developments for $904 psf per plot ratio.

Analysts are divided over whether HDB upgrader demand could be hurt by a drop in the number of HDB resale transactions with cash over valuation (COV), which refers to the difference between the sale price of a flat and its actual HDB valuation, and which is paid for in cash by the buyer.

About 15 per cent of buyers forked out COV for their flats in the fourth quarter of 2023, down from almost 30 per cent in the same period in 2022, National Development Minister Desmond Lee said earlier in January.

Mr Gafoor argued that a low proportion of COV transactions does not necessarily mean that private housing demand will be affected.

He believes this demand is influenced more by the employment rate, income growth, mortgage rates and market sentiment.

Declining resale flat transactions, on the other hand, could point to a shrinking pool of HDB upgraders for the private housing market, he said.

Resale flat transactions in the fourth quarter of 2023 fell 2.2 per cent to 6,547 – the lowest volume for the fourth quarter since 2020 – from 6,695 in the third quarter. In 2023, total resale flat volumes dropped 4.2 per cent to 26,735 units from 27,896 in 2022.

There are signs of a slowdown in the private residential market as well. Overall sales take-up rates at new launches with at least 100 units have dropped to about 55 per cent in 2023 from 72 per cent in 2022, JLL noted.

In the face of more competition and uncertain market conditions, some developers may delay launches, while others may up the ante with marketing strategies, including opening show-flats during the Chinese New Year holiday in February, Mr Mak said.

JLL’s Ms Chia believes developers could adopt a more sensitive pricing strategy, but she does not expect major price corrections due to high land and development costs, ample liquidity, and hopes of an economic recovery as well as interest rate cuts in the second half of 2024.

If a moderation in interest rates really happens in the second half, that could boost sentiment among residential property buyers somewhat.

But even with more buyers coming to terms with the new norm of 3 per cent to 3.5 per cent mortgage rates, the days of exuberant buying may be gone. This is especially so given the sizeable launch pipeline in 2024, the current inflationary environment, and recent rounds of cooling measures.

Therefore, it will be interesting to see what marketing strategies developers will employ to boost sales of new projects that have to be launched in 2024, and even existing ones, in a slowing private residential market.

And whether buyers – including HDB upgraders – will bite.


Resale Prices
Private Property
New Home Sales

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