Housing and Development Board (HDB) resale flats continue to rise consecutively for the 22nd month. The increase is across all flat types and locations. When covid first broke out till now, the housing situation has remained unchanged. The demand for almost immediate housing is apparent. It can be from long completion time for Built to Order (BTO) flats, needed space for growing family or working from home. Many people are turning to resale flats as a solution. The demand resulted in overall prices rising 1.1 per cent in April month to month and 11.9% over the year.
Although the price has risen continuously for almost two years, the resale volume shows signs of stabilisation in March and April; this may be due to HDB launching new flats in popular areas such as Kallang/Whampoa. This month will see HDB launching new flats in towns like Bukit Merah, Queenstown and Toa Payoh, and this may be the HDB launch of the year. It is uncommon to see HDB launching so many new flats near the city area. These new flats give buyers a dilemma or make them think twice about whether to try their luck getting a new unit or getting a resale flat.
New flats introduced in February and May will undoubtedly take some volume away from the resale market, but this comes with many other issues for homebuyers to face. While waiting for a new flat to build, which can take up to 3 to 5 years or more, buyers who do not have their parents’ place to stay will need to rent for the coming years. With the strong demand for rent in this pandemic, new home buyers will need to fork out more for rent, which will affect their cash flow. The rising inflation and interest rate hikes add to the problem.
The resale market gives home buyers the answer to their problems, but it is not an easy path for homebuyers to take either. On 15th December 2021, the government tightened the Loan to Value (LTV) limit for HDB from 90% to 85% to curb rising prices. Homebuyers must fork out more CPF monies or cash. From January to April 2022, prices continued to increase, and it did not affect the resale market as home buyers urgently needed to get their homes. Although million-dollar HDB resale transactions have gone down this year, more people choose to buy their resale flats away from the central areas, such as Seng Kang, Punggol, Tampines, Yishun and Choa Chu Kang. These are the top 5 towns based on transaction volume.
Overall, we see that the resale prices will continue to climb until the end of the year. With a limited supply of resale units for sale, we do not think this situation will change in these few months. With the addition of the long waiting time for BTOs due to the supply chain situation and the covid restrictions in China, homebuyers’ aspirations and urgent need for housing remain very similar.