Wednesday, October 31, 2018

Falling HDB Resale Prices A Thorny Issue For Singapore Government

HDB resale prices could slide by up to 2.0% this year.

There could be severe political ramifications if the Singapore government fails to adequately address the downtrend in the prices of HDB resale flats and the loss of their value as the lease dwindles, reported Bloomberg recently.

“The government has to walk a tight rope on this,” said ZACD Group research head and executive director Nicholas Mak, who expects HDB resale prices to slide by 1.0 percent or 2.0 percent for the whole of 2018.

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The authorities can neither extend the leases of HDB flats “for free” nor let prices of such properties fall too much, he explained, as its impact on the wealth of homeowners could have serious political consequences.

Cushman & Wakefield also thinks that the fall in values would not only dampen public sentiment, but could also negatively affect demand for private homes as fewer HDB flat dwellers will feel comfortable enough to upgrade to private condos.

Previously, an HDB flat purchased for around $72,500 in 1985 is now selling for about six times that amount, translating to annual compounded price growth of 5.6 percent.

However, the value of HDB resale flats has been declining, while that for private residential properties has recovered in the last five quarters. This has resulted in a price gap of 13.8 percent, or the biggest in over 10 years.

Latest data published last Friday (26 Oct) by the Housing Board also shows that the HDB resale price index slid 0.1 percent quarter-on-quarter in Q3 2018. This took place even though the number of resale transactions rose 18.9 percent quarter-on-quarter and 21.6 year-on-year to 7,063 cases.

Nonetheless, the government is carrying out measures to tackle this issue. Among them is the Voluntary Early Redevelopment Scheme (VERS), which will allow homeowners to vote on whether to sell their HDB flats to the government once the age of their block hits 70 years before the 99-year lease ends. However, Credit Suisse said VERS won’t be implemented for another 20 years and won’t apply to all HDB flats.

Meanwhile, the Housing Board announced that it will offer around 3,800 Build-To-Order (BTO) flats in Yishun, Tengah, Tampines, Sengkang and Sembawang next month. It will also hold a concurrent sale of balance flats.

In particular, those buying BTO flats in Yishun, Sengkang and Sembawang will have a shorter waiting time of 2.5 years instead of the usual three to four years.