BULLETIN HDB RESALE & PRIVATE RESIDENTIAL PROPERTY MARKET - REPORT 4Q 2019 - ERA Singapore
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
THE BULLETIN HDB RESALE & PRIVATE RESIDENTIAL PROPERTY MARKET REPORT 4Q 2019 BY ER A RESE A RC H & CO NS U LTA N CY
THE BULLETIN | 4Q 2019
Introduction
The public housing resale market continued to expand in 4Q 2019 with an overall higher transaction volume
in 2019 as compared to 2018. At the same time, private property prices continued to rise while transaction
volume in the private primary and secondary housing markets remained stable.
HDB Resale Market 4Q 2019
HDB Resale Price
After six long years of gradual decline, the HDB
resale residential price index finally started to
recover, initially with a minimal 0.1% quar-
ter-on-quarter (qoq) in 3Q 2019. This was followed
by a more definitive 0.5% qoq increase in the
subsequent quarter. The price index ended 2019
with a 0.1% year-on-year growth.
The price recovery was contributed by the effects
of the changes in government policies, such as the
introduction of the Enhanced Housing Grant
(EHG) and the amendments to the regulations
governing the use of CPF funds for the purchase Source: HDB, ERA Research & Consultancy
of older HDB flats.
Eligible buyers could enjoy more subsidies when purchasing their HDB flats. At the same time, some
homeowners took the opportunity to increase the asking prices of their resale flats. The changes to the use of
CPF funds for the purchase of older HDB flats would support the resale prices of older flats by firming up the
demand for such flats. The combined effects of these developments nudged up the HDB resale price index.
HDB Resale Volume
The improvement in the market sentiments also led to an expansion in the transaction volume of HDB resale
flats. In the last quarter of 2019, 6,339 resale flats exchanged hands, which is 1.2% higher than the preceding
quarter. In the past three years, the HDB resale volume usually contracted in the fourth quarter of each year.
However, the government initiatives could have contributed to the higher resale volume in 4Q 2019.
1THE BULLETIN | 4Q 2019
HDB Rental Market
In 2019, the HDB leasing volume in each quarter
had remained fairly stable at about 12,000 flats. In
the October to December quarter, 12,079 HDB
flats were reportedly rented out by their owners.
This is a minimal 0.6% qoq increase, which
illustrated the stable quarterly volume. For the
whole of last year, a total of 48,195 HDB flats were
leased out, which is 3.8% higher than the rental
volume in 2018. In 4Q 2019, a total of 57,200 HDB
flats are rented out by the flat owners.
Source: HDB, ERA Research & Consultancy
HDB Policy Changes
Two recent policy changes which have contributed to the improved market sentiments for the HDB resale
market in the second half of 2019 were the Enhanced Housing Grant (EHG) and the amendments to the rules
governing the use of the homebuyer’s CPF funds for the purchase of older flats together with the changes to
the HDB loans regulations.
(1) Enhanced Housing Grant
The Enhanced Housing Grant (EHG) was introduced by the government on 10 September 2019 with an
objective to make public housing more affordable and accessible for all Singaporeans. By replacing the
Additional Housing Grant (AHG) and Special Housing Grant (SHG), the EHG will provide more housing grants
for eligible HDB homebuyers. At the same time, the government also raised the household income ceiling for
eligible HDB flat applicants. As such, more Singaporeans from the lower- and middle-income households
could more easily purchase their first HDB flats.
With the introduction of the EHG, first-timer families buying a HDB flat with a lease that can last them and
their spouses to the age of 95 years would receive a EHG of up to $80,000 (otherwise a pro-rated EHG) as
long as their household income does not exceed $9,000 a month. The amount of EHG received will be based
on the applicants’ household income, where lower income families will receive a higher grant. The applicant is
eligible to receive the EHG regardless of the type of Build-To-Order (BTO) flats or the location of the flats.
A Singaporean household who is purchasing its first HDB resale flat may receive other housing grants such as
the Family Grant and Proximity Housing Grant (PHG), in addition to the EHG. Depending on the household
income and citizenship status, the maximum combined HDB housing grants that the buyer of a HDB resale flat
can receive is $160,000, while the maximum housing grant that a buyer of HDB BTO flat is $80,000. The
government would typically price HDB BTO flats cheaper than HDB resale flats.
At the same time, the government raised the household monthly income ceiling for buying HDB BTO flats
from $12,000 to $14,000. As of 11 September 2019, families with household income of $14,000 or lower are
eligible to apply for HDB BTO flats.
First-timer families with household income exceeding $9,000 and up to $14,000 a month would not receive
any housing grants when applying for BTO flats. However, they would be entitled to the Family Grant of up to
$50,000 and/or Proximity Housing Grant (PHG) of up to $30,000 if they were to buy a resale HDB flat.
However, they will not receive any EHG for their purchase of the HDB resale flat due to their higher income
level.
2THE BULLETIN | 4Q 2019
Household with monthly income of more than $14,000 are not allowed to purchase HDB BTO flats. However,
they are eligible to buy HDB resale flats in the open market. The only grant they may receive is the Proximity
Housing Grant (PHG) of up to $30,000 if the household would like to live near or with their parents or adult
children.
Implications
With more housing grants provided to buyers of HDB resale flats, some sellers had taken the opportunity to
increase the asking prices of their current flats. However, as there is ample supply of HDB resale flats in the
market, buyers have many choices. Flat owners who raised their asking prices sharply may find it challenging
to sell their HDB flats.
(2) Changes to the Use of CPF Funds and HDB Loan Criteria
Four months prior to the implementation of the EHG, the government announced on 9 May 2019 that the rules
governing the homebuyers’ usage of their CPF funds to finance the purchase of older leasehold homes and
the HDB housing loan criteria have been adjusted to provide more flexibility for Singaporeans to purchase a
home for life, while safeguarding their retirement adequacy.
The criteria on how much CPF could be used or the maximum HDB loan amount would be less dependent on
the purchased home’s remaining lease. Instead, it would be based on whether the property can cover the
youngest buyer to at least the age of 95 years.
The adjustments took effect on 10 May 2019.
Table 1: Summary of changes to CPF use and HDB housing loan criteria
Before 10 May 2019 From 10 May 2019
Remaining lease ≥ 60 years Home covers youngest buyer to at least
Homebuyers (HDB + private) were allowed to age 95*
use their CPF up to the Valuation Limit (VL). Homebuyers (HDB + private) were allowed to use their
CPF up to the VL.
Can loan up to 90% of the Loan-To-Value (LTV)
limit (HDB only). Can loan up to 90% of the LTV limit (HDB only).
Remaining lease < 60 years ≥ 30 years Home could not cover youngest buyer
CPF use to be capped at a pro-rated VL (HDB + private). to at least age 95*
CPF use to be capped at a pro-rated VL (HDB + private)
More restricted HDB loan amount.
HDB loan amount to be pro-rated from the
90% LTV limit.
*Remaining lease of home must be at least 20 years
Source: MND, MOM, ERA Research and Consultancy
3THE BULLETIN | 4Q 2019
Previously, homebuyers were allowed to use their CPF up to the Valuation Limit (VL) and obtain HDB loans up
to 90% of the Loan-To-Value (LTV) limit as long as the property bought had a remaining lease of at least 60
years. If the property has a remaining lease of less than 60 years, the CPF use will be capped at a pro-rated
VL, and homebuyers would have a more restricted HDB loan amount.
After the adjustments, as long as the remaining lease of the property purchased can cover the youngest buyer
to at least the age of 95 years, homebuyers could use their CPF up to the VL and obtain HDB loans up to 90%
of the LTV limit. If they do not meet these criteria, the use of their CPF will be capped at a pro-rated VL, while
the HDB loan amount would be pro-rated from the 90% LTV limit.
Implications
The change to these regulations would give buyers more flexibility to finance the purchase of older HDB flats
and leasehold residential properties. Under the old rules, there is lower demand for residential properties with
remaining leases of less than 60 years. The alignment of the property lease with the age of the buyer would
rationalise the use of the CPF funds for home financing. As a result, this would support the demand for older
HDB flats and leasehold homes.
HDB Resale Market Outlook
Although the HDB resale price index ended 2019 with a marginal 0.1% yoy increase, this is just the start of the
long-awaited price recovery.
The objective of the changes in public housing policies is not to increase the prices of HDB flats. However, the
effect of the changes could increase demand for HDB flats. As a result, it could lead to a gradual rise in HDB
resale prices.
The HDB resale transaction volume had largely unchanged between 6,200 and 6,400 flats every quarter in the
April to December 2019 period. Depending on the duration and severity of the Wuhan virus outbreak, the HDB
resale volume during the outbreak could be adversely affected. However, transactions could rebound rapidly
due to pent-up demand once the virus outbreak has ended.
4THE BULLETIN | 4Q 2019
Private Residential Property Market 4Q 2019
Private Residential Property Price
The price expansion in the Singapore private residential property market that started in 2Q 2019 continued for
the rest of the year but at a decelerating pace. The overall private residential property price index grew by
0.5% qoq in 4Q 2019, slower than the 1.3% qoq increase in the preceding quarter. For the whole year, the
property price index rose by 2.7% year-on-year (yoy), which was lower than the 7.9% yoy increase in 2018.
The price expansion in the October to December quarter was primarily driven by the landed residential
property prices which increased by 3.6% qoq. On the other hand, the non-landed residential property price
index slipped slightly by 0.3% qoq.
Among the three market segments, only the
suburban non-landed housing price index
increased in 4Q 2019, while property prices in the
prime districts and city fringe contracted. The
suburban non-landed housing prices which was
represented by the Outside of Central Region
(OCR) residential property price index, increased
by 2.8% qoq in the last quarter of 2019. During the
same period, the non-landed property price index
of the Core Central Region (CCR) and Rest of
Central Region (RCR) contracted by 2.8% qoq and
1.3% qoq respectively.
Source: URA, ERA Research & Consultancy
5THE BULLETIN | 4Q 2019
Private Residential Property Rental
For the past ten years, a seasonal pattern is
observed in the last quarter of each year when the
private residential rental index either declined or
grew at a slower rate as the market entered a
year-end holiday period. Last year was no
exception when the private residential rental
index dipped by 1.0% qoq in 4Q 2019 after
appreciating by 2.4% in the first nine months of
the year.
The non-landed rental index decreased across the
different market segments in 4Q 2019, ranging
from 0.7% qoq in RCR to 1.0% qoq in CCR and
OCR. However, the residential leasing market
remained healthy, as indicated by the 1.4% yoy
increase last year, faster than the 0.6% yoy rise in
2018.
The rising rental rates was partly attributed to the
relatively low supply of newly completed private
housing in the past two years. From 2013 to 2017, Source: URA, ERA Research & Consultancy
an average of 17,300 new private housing units
were completed each year. In 2018 and 2019, the
supply dropped to 5,700 and 3,600 newly
completed private dwelling units each year
respectively. As a result, the occupancy rate rose
to 94.5% at the end of 2019 after it reached the
trough of 91.6% in 3Q 2017.
6THE BULLETIN | 4Q 2019
Private Residential Primary and Secondary Markets
Source: URA, ERA Research & Consultancy Source: URA, ERA Research & Consultancy
Typically, real estate developers’ sales would be uncompleted units sold in 2018. This is an early
lower in the fourth quarter of the year as real indication of what is to come in 2020 when there
estate activities slowed down, especially during would be a significant number of prime projects
the holiday season in December. With only 10 new to be launched.
projects launched in 4Q 2019 as compared to 15
projects launched in the third quarter, the number In the secondary market, which consisted of
of private housing units sold by developers resale and sub-sale transactions, 9,238 private
dropped by 25.5% qoq to 2,443 units. housing units exchanged hands in 2019, which
was 30.8% lower than the transaction volume in
For the whole of last year, 11,354 private housing 2018. The key factor that caused the decline in
units, excluding Executive Condominium (EC) secondary market transactions was the majority
were launched for sale, which was 29.4% higher of the displaced owners of the private
than the volume in 2018. The most notable developments that were sold in the enbloc market
increase was in the Core Central Region (CCR) boom had already found replacement homes in
primary housing market, where 1,518 dwelling 2017 and 2018. In addition, the increase in the
units were launched for sale in 2019, which was primary market sales activities drew some
more than tripled the volume in the preceding demand from the secondary market.
year.
However, the secondary market transaction
As a result, the developers’ sales in their high-end volume in 2019 was still 30.5% higher than the
projects also increased last year. A total of 851 annual average of 7,078 units transacted in the
uncompleted housing units in the CCR were sold 4-year period from 2013 to 2016, just before the
2019, which was 3.5 times more than the 241 start of the 2017-2018 enbloc sale market boom.
7THE BULLETIN | 4Q 2019
Outlook
There could be more buying demand from HDB upgraders in the coming months. In 2020, an estimated
26,100 new Housing Board Development (HDB) flats will be eligible to be sold in the resale market when they
reach the end of their 5-year MOP (Minimum Occupation Period). This potential new supply of resale HDB
flats is 50% greater than the annual average of 17,400 flats in the past 5 years from 2015 to 2019. As some of
the owners of these HDB flats will seek to upgrade to private properties, it could increase the demand for
private housing.
At the same time, the new HDB flats that would be sold in the resale market would also command prices that
are higher than the older flats. As a result, this would contribute to the growth of the HDB resale price index.
In light of the slow but still positive economic growth and the relatively higher prices of the new residential
launches expected this year, the private housing price index is expected to continue to increase, but at a
more modest pace of less than 1% each quarter in 2020. For the whole of 2020, the private residential
property price index could appreciate by 2% to 3% year-on-year (yoy).
After reaching the trough of 3,600 units in 2019, the supply of newly completed private housing units will
rise to an estimated 6,300 units this year. However, the upcoming supply is still only half of the 10-year
average supply of 12,400 units. Therefore, rental rates are still projected to continue to appreciate but at a
moderate pace of 1% to 2.5% yoy in 2020.
At the time that this report was written, a new flu-like disease outbreak was reported in Wuhan, China. There
were certain similarities between this new disease and the Severe acute respiratory syndrome (SARS) that
became a pandemic in 2003. The impact of this Wuhan virus outbreak on the Singapore economy and real
estate market is still uncertain as new developments are ongoing.
However, if the Wuhan virus outbreak is similar to the SARS outbreak, it could adversely impact transaction
volume more than property prices and rents. The SARS outbreak was brought under control in less than six
months in Singapore. Therefore, if the duration and severity of the Wuhan virus outbreak is similar to those
of the SARS outbreak, the negative impact could be short-term. As a result, property sellers and developers
who have the financial holding power are unlikely to reduce prices.
8Nicholas Mak Head of Research & Consultancy ERA Realty Network Pte Ltd Estate Agent Licence No: L3002382K 229 Mountbatten Road #03-01 Mountbatten Square Singapore 398007 T : (65) 6226 2000 F : (65) 6220 0066 www.era.com.sg A wholly owned subsidiary of APAC Realty Ltd Disclaimer: The information contained in this document is for general information purposes only and does not have regard to the specific investment objectives, financial situation and the particular needs of any recipient hereof. This report is prepared by Research & Consultancy Department of ERA Realty Network Pte Ltd (“ERA”). This report may not be published, circulated, reproduced or distributed in whole or in part by any recipient of this report to any other person without the prior permission of ERA. The information or views contained in this document (“Information”) has been obtained or derived from sources believed by ERA to be reliable. However, ERA is not responsible for the accuracy or completeness of such sources or the Information and ERA accepts no liability whatsoever for any loss or damage arising from the use of or reliance in whole or in part on the Information. ERA and its connected persons may have issued other reports expressing views different from the Information and all views expressed in all reports of ERA and its connected persons are subject to change without notice. ERA reserves the right to act upon or use the Information at any time, including before its publication herein. The recipient should not treat the contents of this document as advice relating to legal, taxation or investment matters. Any person or party interested in further pursuing the matters contained herein is advised to make their own independent investigations and verification of the Information and any other information such persons or parties may consider to be relevant or appropriate in the circumstances. This document does not, nor is it intended to, constitute an offer or a solicitation to purchase or sell any assets or property or to enter into any legal relations, nor an advice or a recommendation with respect to such assets or property.
You can also read
