Friday, July 03, 2009

HDB Resale Prices hit record highs!

The prices of HDB resale flats have reach a record high[Link] defying analysts prediction that it will fall during this recession as unemployment climbs to 4.9%. What is going on here?


A number of colleagues of mine have been 'looking' for HDB flats in matured estates at locations that are close to work or their parents. They have been 'looking' since 2007 and they thought that the recession would give them a chance to buy at a lower price but they told me that prices held up and there is no shortage of buyers when it comes to resale flat in good locations. If you look at the resale flat index, which is now at the all time high of 140, the recession only slowed the rate at which the index was rising. It fell only slightly once in Q1 2009 by 0.6% since the last recession.
A friend of mine bought a 30 yr old 5-room HDB flat at Marine Parade for $600K recently. He told me he has been looking for 2 years. He gave up waiting for 'better' prices.


This recession is the most severe in the past 10 years yet the impact on HDB resale prices is minimal. One possible explanation is the expansion of our population. In 2008, our population grew by 5.5% to 4.84M[Link] that is an addition of roughly 250,000 people. There were 100,000 newly minted PRs and citizens in 2008 and these people become eligible to buy resale HDB flats. Even in this severe recession demand is up possibly because of new immigrants.



High HDB prices may be good for home owners who bought their property earlier but it burdens young couples who have to shoulder high mortgage debts to buy them. Some may argue that young couples can buy cheaper flats if they are willing to stay further from where they work and where their parents stay - places like Woodlands and Ponggol are cheap but this is a trade off between convenience + quality of life and affordability.....so life cannot be good and affordable for everyone in Singapore. As for the new immigrants, I know many of them and befriended many over the years. I've worked with many of them and most of them are honest hardworking individuals. However, we as citizens have to understand the impact of the govt's immigration policy on the life of Singaporeans. There is no question that some level of immigration is desirable however adding 250,000 people into the population in 1 year may be highly excessive relative to rate of growth of our population if our birthrate is normal. The large number strains our housing, public transport and hospitals.

47 comments:

Anonymous said...

New condos are also selling like hot cakes. Not only that, sellers are also rising their selling price over the last one month as compared to Q1. What is wrong with Singapore?

Singapore Model is indeed unique. We go against the basic Economics Theory of Recession. Looks like we need to throw away what we have learnt on text and start re-writing new economics theory.

Welcome ALL to Uniquely Singapore !

yamizi said...

Lucky,

I observed one interesting phenomenon in this recession.

The companies are trying to cut cost to exaggerate manner but individually, everyone else is spending like nobody's business!

Why?

Anonymous said...

Yamizi, you have a point.

In the last downturn of 2001 and 2003, my then company instituted a company-wide wage cut. The CEO and top management put up a song-and-dance about rallying together in order to move ahead. However a month later a spanking new latest model of a luxury sedan is spotted in the CEO's parking lot replacing the previous model.

This is trickle-down economics. Employers and business owners will always exaggerate for their own benefit. And you know our neo-Republican pro-biz pap govt will always stand on whose side.

Anonymous said...

66% of singaporeans says you are wrong.

Anonymous said...

66% of singaporeans says you are wrong.

Anonymous said...

1. the savings of the singaporean cannot be underestimated, and therefore the holding power
2. the resale HDB remains the most affordable option, high as it may be
3. the BTO/DBSS is not playing by the rules, the queue system is overturn in favour of first come first serve. Here supply is always kept minimal to demand. its artificial.
4. Condos selling like hot cakes is due to the affordability. They will tell you the cost per sq feet transacted, but they never highlight the median size of the condo sold. So 3/4 of a new launch is sold over the weekend is actually referring to the smaller units. 500 sq feet is not exactly the ideal size.
5. The valuations of the HDB is on the high side, but this pegging to compare against private condos end up like a dog chasing its tail. When it compares with private condos, private condos compare against it and it spirals higher.
6. it wont be unique when more jobs are lost and the mortgage rate climbs. Right now savings is doomed.

Anonymous said...

yeah, i've been looking for a place to buy and the prices are indeed holding up.

b4 i read this article, i oredi suspect that it is because of the increase in population.

the gahmen is playing a very risky game, it has to keep attracting new immigrants to hold things up. the minute there is an exodus, prices will start dropping and singaporeans will be left holding the baby.

furthermore, if these new immigrants leave for greener pastures (as most prs i know will), singapore will continually bring in transient residents and get to keep only the lemons in the lot...

Ghost said...

I think everyone is missing one important point here. High HDB prices maybe because the flippers are back in action. Maybe it's just me but there seems to be more empty flats around in Singapore. People buy the house but no one live there because everyone is buying it as 'investment'.

Anonymous said...

Unless HDB is more expensive than private condo, the almost 5 million(going to be 6 million)need a roof
over their heads.

Fievel said...

there will come to a saturation point where no matter how much more demand there is, people just cannot afford the expensive housing in singapore, because our pay is not going to head north indefinitely and as it is there isn't much upside left what with the global economy. But as we can all see from the prices of cars in Singapore, singaporeans are really adaptable and will change to fit the environment. The day we hit the saturation point might be when life becomes so miserable for the average and reserved lims and tans, even they start to protest. Traction in such stuff once gained is hard to stop.

Anonymous at 9:53am, well said, Sporeans will be left to hold the baby eventually.

Anonymous said...

With skyhigh new HDB pricing and evaluators continue to give high re-sale valuation, it looks like the prices here is going to stay for a while or maybe even head North and create new heights.

Where will this lead us to eventually? Newton law of "What goes up must come down" again does not apply here.

We need to dig on Newton's grave and flip him over.

Fievel said...

Mr Goh Chok Tong was just saying we have a lot of young Singaporeans leaving...exactly cos we are the ones left behind by the govt housing policies. The ones cheering are the ones with a second investment property, usually not the young ones.

We all know that HDB prices is a simple result of govt policies controlling both demand and supply. If govt did not intend for prices to go up like this, then they are incompetent. If they did mean for it go up like this, then I dun really understand why they want to do this unless actually this is good for 'us', just not good for 'me'.

Anonymous said...

I am very wary of the optimism as it could be dead cat bounce in the midst of a global deflationary cycle that would take a long time to unwind. I hope I am wrong but we might end up like Japan where property prices are relatively expensive despite a long drawn recession where a lot of people are unemployed and underemployed, and have to resort to rental to have a roof over their head or going back to their parents' houses.

Why the prices would not come down?
As long as we have low interest rate (Japan has in fact negative real interest rate), properties are unlikely to come down too much as the banks need housing loans in times of credit crunch and would be buyers think that the loans are cheap and the properties are good investments. Also, Asian mindset is to own a house, so it is very difficult for us to change our mindsets.

It would take some realisation that we are stuck in this deflationary trap then people would make adjustments, and this process would be very slow but once in force, those who buy at relatively high prices might not see their purchase price any more in their lifetime.

Anonymous said...

Actually, if I am not wrong, HDB prices are pretty stable. In fact, in times of recession or economic downturn, HDB resale prices will remain high. The reasoning is majority of people in bad times will not have the money to buy new housing or upgrade. These who are driving the resale prices are those formerly rich people who run into cash flow problems, people who have no choice but to downgrade and last but not least, the group of people who are newly married. They buy resale HDB flats largely because of the proximity to parents grant. Perhaps a more in depth analysis will be to study the price increases over which type of HDB housing i.e. 3 or 4 or 5 room flats. That will give a better feel of the current situation in Singapore. These increase in HDB resale prices come not as a surprise to me; if I remember correctly, such phenomenon also occured during SARs period and 1998 crisis.

Anonymous said...

Anon 12:28

How do you explain those sell-out Condos?

Anonymous said...

What will Singapore become when LKY no longer around? Same, more stable or less stable?

What will property prices become? Same, shoot higher or crash?

Anonymous said...

For the condos, the phenom of new condo sales heating up is suspicious. the 10 weeks data in Q2 actually points to a drop of 5.9%. All these developers and real estate research firm keeps saying the final 2 weeks data when released will change the whole picture of the private housing market. That means there has to be a drastic increase in the last 2 weeks of june to pull everything up.

Given the fact that all these developers have huge inventories, i can't help to wonder if this is a pump and dump tactic - pump up the idea of a bull and dump as much as possible to these speculators and young couples.

If so, there is some chance that the game may be over when URA reveal the full data for Q2

Anonymous said...

Since 2007, the HDB rental has increased for more than 100% while the HDB resale price increased for merely 30%.

The monthly installment for a 5-rm HDB flat is only about 50% to the monthly rental for the same flat.

Anonymous said...

Anon 3:05

Good observation. Put in some PRC they buy and then let out their rooms where they can cramp in their lesser kin from the mainland for 200 dlrs a bunk - 8 to a room. I gather areas like Jurong the pricing of HDB resale is even more pronounced.

Anonymous said...

What I learn in university is that for every chart and statistics, you always have to look at the underlying assumptions and limitations. Take for example, the HDB resale price index, the base price taken is 1998 as 100. Thus I think it has huge implications in the "shape" of the graph. As for the sell-out of the condominium, I am not too sure where the data comes from. However, I think I have read before that the take-up rate is based upon from the release of the property development company. Again, the analysis will have to be more in depth. Condominiums are also classifed or categorised into different types usually by the geographical locations as in District 9, 10 or 11. Prices of private properties are on the decline as reported in today's paper.
Some residential properties are very niche as in they attract a specific group of buyers. (Thus not reflective of the general sentiments in the property market) If as reported in the Straits Times that private property prices is declining, it is reasonable to expect resale prices to increase. There is a negative correlation between private property and HDB resale prices. At least, this is what I observed. Below is an article from one of the property website (dun know how credible), but on the whole, private property prices are declining.
"As Singapore’s fiscal health continues to slip, official statistics correspondingly reflect a somewhat distressed private residential property sector.Accordingly to the Urban Redevelopment Authority’s (URA) quarterly statistics, overall prices in Singapore’s private residential property market have eased by 14.1% quarter-on-quarter (qoq) in 1Q 2009. This was more pronounced than the 13.8% qoq decrease based on flash estimates, an indication that the average price contraction accelerated in the last three weeks of 1Q 2009. The deteriorating quarterly price growth of 14.1% qoq was also the most significant since 1990. Almost similar quarterly reduction in price growth was captured in 3Q 98 when prices eased by 13.2% qoq. Specifically, both overall landed and non-landed properties witnessed a more marked fall this quarter, by 9.2% qoq and 15.2% qoq respectively.
In terms of the non-landed market segments, while it is no longer unexpected that all three regions experienced continued reduction in prices, it was the mid-tier Rest of Central Region that recorded the sharpest fall (-17.0% qoq). This was followed by the prime Core Central Region and the mass Outside Central Region that witnessed prices wane by 16.2% and 7.3% respectively. In particular it was the larger volume of home sales in the mass market that aided in the lesser rate of price decline in this region.
Total primary sales in the suburban Outside Central Region in 1Q 2009 reached a level to almost what was achieved in the entire 2008. A total of 1,637 units were sold in the primary market, amounting to 64% of all primary market sales islandwide. On the contrary the prime market managed to garner a meagre 9.5% of all primary market sales. The launch market performed similarly, with 63% of all new launches found in the mass market. This compared to the record low (data available since 1Q 2004) 100 units launched in the prime market in 1Q 2009.
The residential rental market, though not as equally fraught as residential prices, experienced its third consecutive quarterly decline, falling by 8.5% qoq in 1Q 2009. In terms of the non-landed market, it was the prime market with the steepest fall of 10.3% qoq followed by the mid-tier and mass market segments that eased by 7.2% and 6.5% respectively. The weakening rental market illustrated that islandwide rentals are 14.2% shy of the peak achieved in 2Q 2008."

Anonymous said...

Statistics can only tell one side of the story. More importantly is what's happening on the ground. What is really holding up the HDB resale prices are 1) Immigrants 2) Limited supply 3)Good rent for HDB flats.

As one of the above comments accurately state, the monthly mortgage installment is substantially less than the monthly rent for a flat. Given such a situation, it only makes economical sense for new PRs and citizens to buy a flat. Also, sellers are now willing to sell at or slightly above valuation, which makes it more affordable since cash upfront is greatly reduced while the rest is taken care of by a bank loan.

The days of oversupply is over when HDB sold off the excess inventories and started the Build-to-Order scheme. What resulted is that supply will always be lower than demand.

Nowadays, with HDB rules being relaxed for sub-letting, owners have another source of income so they won't be forced to sell, thus reducing the supply even more. Some are getting a comfortable income renting out room by room (or bunk by bunk) to foreign labourers or students.

What will cause a drop again?
- Maybe a prolong recession when more jobs are lost and repossession by banks increases,

- Or when the govt restricts the inflow of immigrants thus reducing demand (which is unlikely to happen),

- Or when the banks realise that they can't just keep matching the increasing resale flats valuation. Imagine a resale flat at $1 million! This will mean a ceiling is reached but doesn't mean that prices will drop much.

The main danger is buying a flat now at the index's peak. What goes up must surely come down. I pity today's young couples and immigrants for this will be a burden on their backs for many decades to come. But if you can't wait, then you just can't wait. Sigh...

Anonymous said...

HDB flats, just like COE, control the supply, control the price.

After all just 700 sq km area to control only what.

Anonymous said...

Will there be a day when a 5rm HDB cost 1 million?

Looks like we are reaching the Swiss living standard soon. Hooray !!

Anonymous said...

The FTs work here, followed by getting PR usually within 1 or 2 years, than proceed to buy HDB. I have personally come across many of such cases. No string attached.

Anonymous said...

But there are many people happy with the price surge, namely the owners of HDB flats......until they realise it's just phantom wealth. What I mean is that even if they sell at a high price, they would have to buy another one at a high price, thus cancelling out whatever profit they can keep. Which also explains why HDB urgraders made up the largest percentage of buyers at recent property launches. They are all thinking that it's better to buy when private property prices are still relatively low and sell when HDB prices are at the peak.

But who are the real winners here? Errhem, it's the developers lah. Just pure commonsense, isn't it?

wl said...

The government should rethink its policy carefully as the way things are developing, the young will have difficulty to own a property without incurring heavy debt that will enslave them. This would be a push factor for them to think of migration.

Anonymous said...

I think this may be part of a broader problem. Govt wants to placate the majority, so passes policies that favor the baby bommers. Same problem is happening in California, with their weird property tax.

In Japan, they refuse to dismantle the system that protect older workers at the expense of the young.

Although the older singaporeans get lots of shit, its nothing compared to what the young have to face.

Anonymous said...

Does not look good at all. Despite downturn, prices are still holding.

Imagine if the economy start picking up again, the influx of foreign will regain ground and at an alarming rate, then the prices will really shoot sky, and may not be as affordable to the citizens, the heartlanders, the young couples etc

Anonymous said...

The idea that there is a market price driving the HDB flat prices is a story that PAP has evolved, concocted over the years.

Originally HDB subsidized the flats, then later on it dared not produce the figures to back up its claim when challenged by Chiam in Parliament. Eventually HDB resorted to twisting the term "subsidy" by saying that it is the difference between what the buyer would have to pay to a commercial developer and to HDB for a similar kind of flat.

HDB says that its prices are therefore driven by such imaginary market prices by commercial developers. Have you come across any commercial developers competing with HDB to provide public housing for 85% of the population?

The truth is that HDB being the sole provider for public housing for 85% of the population, none but the HDB sets the HDB flat prices!

Even if HDB takes the market prices of condos as a benchmark to set its prices, that is an inappropriate comparison. HDB buyers are lessees for 99 years, unlike buyers of private properties who become freehold owners, this apart from other important differences which professionals in real estate would be able to tell us.

Now under the sycophant Mabok Tan, things have gotten from bad to worse in a big way.

The prices of 4 and 5 room HDB flats have been raised by this "xiao ren" by around S$100K over a short period of a few years in some estates like Punggol.

Now a new 4-room HDB flat costs around S$270K and new 5-room S$310K when 5 years back they were S$100K less.

When you get a boot-licker like Mabok Tan to be a minister, he can destroy this country totally, believe me.

He is just working for his own self in trying to suck up to his boss who nowadays is no longer in touch with the people prefering to walk with "giants" giving publics talks to VIPs around the world just to feed his ego.

The other ministers and president, they are scooping up the money and playing smart to not rock the boat. Nobody wants to stick his head out and say hey this is not right anymore. They have become but mere irresponsible and costly parasites of the nation.

PAP should now be known as Parasites Action Party.

This is a good time for those with a political bend to prepare their political arsenal to challenge PAP in the coming elections.

Individuals driven with such a strong sense of mission like Lucky should get together with like-minded people to map out their strategy secretly just like Obama did in the background for years only to spring into action when the time is ripe.

Who would have believed a black man could have succeeded so well say even just a few years back.

But he did, that's what makes all the difference!

Anonymous said...

That '66%' saying youre wrong can never be accepted as an actual figure because not the whole of Singapore voted and the elections department is still under the control of the prime minister.

Keep writing, Tan.

Anonymous said...

Lucky,

And you have Goh Chok Tong lamenting why talented S'poreans are leaving by the droves... Should not a man of his talent (aren't all S'poreans paying for that 'rare' commodity that he posseses?) be able to get to one of the roots of problems of talent emigration?

Anonymous said...

Goh Chok Tong is talented. If not how can he still be retained as senior minister after he was no longer prime minister?

Which other country in the world has this type of system?

Unless the person is extremely talented that they still need him.

Anonymous said...

We have an amazing govt. In areas like housing and transport where competition is known to improve quality and price, they insist on monopoly. In areas where free markets are shown to be bad, like medical care, they encourage "competition".

Ah John said...

Compare with China house market, you will then know what crazy means.

Anonymous said...

All these artificially manipulated gahman policies which create the currrent anti-Newton Laws phenom will collapse one day. Unfortunate Singaporeans caught in the midst will pay the ultimate price. Sigh.

Anonymous said...

"We have an amazing govt. In areas like housing and transport where competition is known to improve quality and price, they insist on monopoly. In areas where free markets are shown to be bad, like medical care, they encourage "competition""

That is what exploitation is all about, and that is what profit and gain maximization are all about.
They win , you lose.

Anonymous said...

The secret is that HDB is controlling the valuation report of every HDB flat. Every valuation report of a HDB flat must be approved by HDB. If they don't lower the valuation, there is no way that the price of HDB flat will come down.

Anonymous said...

I am so seriously wanting to leave this silly place for good. Sad that I even have to entertain this thought. Just the other day, I saw an apartment tower in one of the cities in NZ starting at 80k only!

Is the quality of life necessarily lower in places with lower property prices, say like in NZ? (Although some are going to say we have 700 sqkm of land and BTW large chunk not even naturally formed!) Yes land size is a factor but Public Housing provided by garment should be affordable! Pubic housing SHOULD never be an investment. That should only occur in private housing. I think PAP has forgotten why HDB was created! It was christened and charge with a mission to provide affordable housing to CITIZENS!

I really do hope things will change, but I doubt much will happen since with many citizens being so passive and fearful to do anything! Sigh.

We must not allow our public housing system to continuously head north unabated even during this economic recession. The election is coming soon. Time to let THEM know WE WANT CHANGE AND CHANGE WE MUST!

This is my last chance for Singapore! If nothing much is going to change especially in the public housing aspect (not asking much right?) I am going to leave Singapore with my wife to NZ and don't the garment come tell us that we are leavers and not stayers!

Anonymous said...

HDB apartments and its prices are NOT part of a free market system/structure. Creating sky-high HDB prices is a tool to 'lock-in' Singaporeans to slave out the loans for 30-40 years... not to forget, we don't even own it at the end of the day; it's 99-year lease, not FREEHOLD. Why the garhmen want to make so much monies out of it.. is a separate topic. Sigh.

Anonymous said...

The only reason why our Government has brought the prices of HDB to sky-high prices is to make money inorder to cover for the 400 million plus investment that Temasek had lost. Don't know if anybody remembers this?

That is the only reason. That is why we Singaporeas are required to be locked-in the 30-40 years loan for high valuation prices. HDB is no longer subsidised housing for lower income people. I'm sorry but I tell you now nothing is going to change. If ANY CHANGE it will be Higher prices as time goes by. We have no choice but only to live with this. Pls remember our Govt is not one to go against their prolices that is set. It is what it is. I think everyone needs to be be reminded of this.

Anonymous said...

Now is the time to sell off your HDB. Put it in the market and sell it. After that, rent a unit no matter how small it is.

Why? 2010 market will see a big second wave of tsunami. It is coming from the China housing bubble which has the same nature as Singapore bubble. Also, the US industry continues to slump.

Idiots will only look at past figures and not look at what is happening and deduce what will happen.

If you want to live a life of slaves and your children of slaves too, buy a house now. Good luck to you.

LionKing said...
This comment has been removed by the author.
Anonymous said...

i really feel hopeless!! I get 2 kids & really need a house!! Thinking to get loan fr loan shark just to pay (COV) requested @ resale market!!!Can anyone help??

zerofighterx101 said...

i already gave up on our goverment.The next election,i will vote for the opposition party. The hdb,cpf,population control,inflation etc....is getting me stress up!!! i want to see changes!!!! i will vote the other side for a change.

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