SINGAPORE - The Housing Board resale market may be cooling after rising to new heights in 2022.
Prices hit fresh highs in many locations, and housing demand was robust despite the record prices. The latest wave of property curbs seems effective in putting the brakes on the red-hot housing market as sales volume dipped and prices softened in the last quarter.
The HDB resale market may experience new challenges in 2023, with fewer flats obtaining the minimum occupation period (MOP) and interest rates likely holding firm. Nevertheless, there are opportunities.
How will the market perform in 2023? Will prices continue to rise, and if so, what types of flats will be favoured? Here are four trends that may happen:
Prices may grow slower in 2023:
Buyers may find some respite as prices of resale flats are projected to rise at a slower pace in 2023. Price growth has already weakened since cooling measures were implemented in September 2022.
According to the flash estimate for fourth-quarter 2022, HDB resale prices climbed by 2.1 per cent, down from 2.6 per cent in the third quarter. For the whole of 2022, prices rose by 10.3 per cent, less than the 12.7 per cent increase in 2021.
The smaller increment indicates that sellers are more willing to negotiate prices in the light of the property cooling measures, which have impacted the housing affordability of many buyers. There is also less demand from private home owners purchasing unsubsidised HDB resale flats since they must observe a 15-month wait-out period after selling their private homes.
This rule does not apply to those older than 55 who purchase four-room or smaller flats. Furthermore, rising interest rates have affected buyers who are not eligible for an HDB loan.
In 2023, the global economy may experience a slowdown. The International Monetary Fund lowered global growth projections from 3.2 per cent in 2022 to 2.7 per cent in 2023. Singapore’s gross domestic product growth forecast has similarly been reduced to between 0.5 per cent and 2.5 per cent for 2023.
With higher property taxes, the increase in the goods and services tax, inflationary pressures and sustained interest rates, most buyers will continue to be prudent in their home purchases. More Build-To-Order (BTO) flats will also be released for sale, which may draw some buyers away from the secondary market.
But income growth and robust employment will prop up sellers’ holding power. Most sellers are not likely to drop prices unless they face financial difficulties or job losses. Therefore, the net effect may see prices growing slower, between 5 per cent and 8 per cent in 2023, barring any major macroeconomic crises.
Resale supply will be shrinking:
This year may be a window of opportunity for buyers to snag a unit, since the market is taking a breather and as price growth eases after the cooling measures. Moreover, buyers will have fewer flat options as supply dwindles over the next few years.
Resale home supply will be tight as the number of flats obtaining their MOP will be falling significantly, from 31,325 units in 2022 to 15,748 in 2023, dipping further to 13,093 in 2024, and 8,234 in 2025. The sharp contraction in number of MOP flats will mean fewer flats being put up for resale and lease.
Furthermore, some flat owners may find it harder to upgrade to private housing after their borrowing limits have been tightened. With more people holding their flats for longer periods, the existing housing stock available for resale will be reduced. Many resale flats have been sold over the past two years, which will further reduce the housing stock.
Historical trends indicate a one- to two-year time lag for the market to feel the full impact of any supply changes. Buyers are currently enjoying the bumper crop of flats that have obtained MOP over the past few years. From 2024, the effects of a reduced housing supply may slowly permeate the market. Prices and rents may escalate again when demand far exceeds supply.
Large and rare flats are hot property:
Certain flat models may continue to be favoured for their size and rarity. In 2022, about a third of resale transactions were for big flats of at least 110 sq m. Also, 8.5 per cent were large flats of at least 130 sq m.
Buyers were willing to pay top dollar for big flats. A total of 287 resale flats of at least 110 sq m were sold for $1 million in 2022.
Large flats of at least 130 sq m experienced more than a 10 per cent price appreciation in 2022. Many are flat types that are no longer offered under the BTO scheme. For instance, about 800 of these transactions were for maisonettes, and more than 1,000 units were apartments or premium apartments. Others included apartment loft units, terraces or adjoined flats.
As fewer BTO flats have been sold in mature estates recently, buyers looking for large units may continue to buy from the resale market. For instance, the number of newly launched five-room and three-generation BTO flats in mature estates dipped from 1,911 units in 2017, to 1,204 in 2021, and 489 in 2022. Therefore, demand for five-room and other big flats may stay healthy in 2022.
Demand for flats in non-mature estates:
The notion of living in non-mature estates may not have been favourable in the past. However, the narrative could be changing as flats in non-mature estates are gaining popularity and commanding higher prices in recent years.
Surprisingly, in 2022, the price growth of resale flats in non-mature estates outpaced that in mature estates. The average price of flats in non-mature estates rose 8.7 per cent, from $482,765 in 2021 to $524,786 in 2022, while those in mature estates increased by 6.7 per cent, from $547,890 to $584,864 over the same period.
Moreover, a growing number of flats in non-mature estates are being transacted at higher prices. A total of 428 units were sold for at least $800,000 each in 2022, up from 29 units in 2019, and 33 in 2020. These flats can be found in 10 of the 11 non-mature estates, indicating that certain flat types in almost all suburban locations have potential to yield high prices.
At the upper end of the market, a record 22 resale flats from six non-mature estates – Woodlands, Hougang, Yishun, Punggol, Bukit Batok and Jurong East – changed hands for $1 million each in 2022. In contrast, previously, suburban flats being sold for $1 million each was largely unheard of, with only one such transaction recorded in 2018.
Suburban living has become more attractive in an era of hybrid work. With enhanced connectivity and improved amenities, people may not mind living in non-mature estates, given the affordability and space. As more buyers recognise the value of living in non-mature estates, we may expect more resale flats in these areas to be transacted at high prices in future.