Is it a Good Deal?: $635,000 for a three-room HDB flat at Commonwealth Avenue with remaining lease of 68 years
Please revise the attached article regarding the HDB flash estimates released on Jan 2, which revealed that resale flat prices had risen by 2.5% quarter-on-quarter (q-o-q) in 4Q2024. This growth was slightly slower than the 2.7% q-o-q increase recorded in the previous quarter. It also marks the 19th consecutive quarter of price increases in the HDB resale segment.
According to data released by HDB, the flash estimates for 4Q2024 showed a 9.6% increase in HDB resale prices for the whole year, which is a significant jump from the 4.9% growth seen in 2023. However, it is a slower pace of growth compared to the 10.4% increase in 2022 and the 12.7% growth in 2021. Chief researcher and strategist at OrangeTee Group, Christine Sun, noted that this may be attributed to government measures implemented in August 2024, which reduced the loan-to-value (LTV) limit for HDB loans to 75%.
OrangeTee also observed a slowdown in price growth for some flat types based on HDB caveat data from data.gov.sg downloaded at 8.15am on Jan 2. The median price of four-room flats increased by 2.5% q-o-q in 4Q2024, which was a slower pace compared to the 3.4% growth in 3Q2024. Similarly, two-room flats also saw a slower q-o-q increase of 2% in 4Q2024, compared to 3.9% in 3Q2024. Executive flats registered a 1.2% q-o-q price increase in 4Q2024, compared to 1.7% in the previous quarter. On the other hand, prices for five-room flats grew by 3.2% in 4Q2024, which was faster than the 1.2% increase in 3Q2024.
In terms of resale volume, there was a 3.6% year-on-year (y-o-y) decline to 6,314 units in 4Q2024 from 6,547 transactions in 4Q2023. It was also down 22.5% q-o-q from 8,142 units in 3Q2024. Sun attributed this decline primarily to HDB launching over 8,500 new flats in the October Build-to-Order (BTO) exercise, with many units in prime and desirable locations. This may have diverted demand away from the resale market towards the BTO market, as these flats have attractive features such as scenic views and proximity to MRT stations. Additionally, the seasonal year-end school holidays may have also played a role in the lower resale volume, as many Singaporeans tend to travel abroad during this period, resulting in decreased house viewings and sales activities.
However, head of research and content at PropNex, Wong Siew Ying, believes that the slower pace of growth in 4Q2024 can also be attributed to the government intervention in August 2024, which reduced the LTV limit for HDB loans to 75%. This may have caused buyers to wait and see before making a purchase, resulting in a thinner resale volume and putting a drag on prices.
Despite the decline in resale transactions, the total number of million-dollar flat transactions reached a record high of 1,033 units in 2024, which is more than double the 469 million-dollar transactions recorded in the previous year. According to OrangeTee’s Sun, this is largely due to the new classification of Plus and Prime classification BTO flats, which may have driven more homebuyers to seek out HDB resale homes in central locations. This is because these buyers are unwilling to accept the resale restrictions such as a 10-year minimum occupation period (MOP), rental restrictions after MOP, subsidy clawback upon resale, and resale income cap on future buyers.
Looking ahead, OrangeTee expects HDB resale prices to continue rising in 2025, but at a slower rate than in previous years. This is due to prices already reaching new highs in many areas, creating affordability concerns for potential buyers. Additionally, the ongoing supply of BTO flats is expected to help moderate price growth in the secondary market. However, the degree of price stabilisation will depend on the number of BTO flats the government plans to release in the upcoming years.
In February 2025, HDB will launch its largest sale of balance flats (SBF) exercise, offering more than 5,500 flats across various towns. According to Lee Sze Teck, senior director of data analytics at Huttons Asia, some prospective resale flat buyers have decided to wait and try their luck for these new flats. Moreover, interest rates may go lower in 2025, allowing buyers to take on a more sizeable loan amount to buy a new home. This may cause some buyers to set their sights on either an executive condo (EC) or a resale condo, resulting in a stabilisation of the million-dollar flat market at around 900 to 1,200 units in 2025.
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In terms of projections for 2025, ERA Singapore anticipates a 3% to 6% growth in HDB resale prices, with 26,000 to 27,000 resale units changing hands by the end of the year. PropNex expects resale prices to grow at a slower pace of 5% to 7%, supported by a resale volume forecast of 29,000 to 30,000 units. Huttons forecasts that HDB resale flat transactions will end the year at 26,000 to 28,000, with resale flat prices likely to grow at a slower pace of 5% to 8%. All in all, the HDB resale market is expected to perform well in 2025, underpinned by healthy housing demand and fewer MOP flats coming on – possibly keeping resale prices firm.