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- HDB resale market posted a stunning rebound as sales volume rose by 127.3 per cent quarter-on-quarter to 7,787 unit in Q3
- The pandemic and economic uncertainties have not stopped the upgrading aspirations of Singaporeans as sales of new flats continue to rise this year.
- The HDB Resale Price Index climbed higher by 1.5 per cent when compared to the preceding quarter.
- Prices of resale flats rose across many housing estates last quarter, indicating that the price increase was rather broad-based.
HDB resale market posts a stunning rebound in Q3
Singapore’s public housing market posted a stunning rebound last quarter after clocking historically low sales in May when house viewings were barred during a two-month Circuit Breaker lockdown. Various catalysts may have driven the upswing in demand. The fast turnaround in the property market could be fuelled by the aggressive stimulus packages unleashed globally to weather the economic fallout of the pandemic. Capital piling up in the Asia Pacific region has increased the funding available for property investment. Strong government intervention and various financial assistance schemes such as loan deferments may have also prevented widespread mortgage defaults and flat prices from tumbling.
According to the HDB public housing data for the third quarter of 2020, prices of HDB resale flats increased by 1.5 per cent quarter-on-quarter (q-o-q), after rising marginally by 0.3 per cent in the prevailing quarter (Charts 1 and 2). Year-on-year (y-o-y), prices rose 2.3 per cent. For the first three quarters of this year, prices increased by 1.8 per cent, which has exceeded our prediction of between -2 and 1 per cent for the whole of this year. Comparatively, prices dipped 0.4 per cent over the same period in 2019.
Chart 1 Market summary
Chart 2 Overall price index rose 1.5% q-o-q
The increase in prices could possibly be attributed to many newer HDB resale flats being sold last quarter. As newer flats tend to command higher prices than older ones, the overall price index could have been ‘uplifted’ by the newer flats. Some sellers have also raised their asking price since housing demand has returned. Some sellers may have also increased their asking price in light of the rising demand for HDB flats.
Price of flats rose across all flat types in Q3 (Chart 3) The average price of 3 room flats rose the most by 4.8 per cent q-o-q. 4 room flats increased 1.5 per cent while 5 room flats climbed 1.4 per cent q-o-q. Last quarter, an HDB flat at the Pinnacle@Duxton was sold for a record S$1.258 million. Such pricey flats could be the exception rather than the norm. 46 million-dollar transactions were inked in the first three quarters of this year, fewer than the 57 units transacted in 2019 and 51 in 2018 over the same period of time.
Chart 3 resale prices rose across the board
Overall SALES VOLUME
The HDB resale segment headed for a quick upswing as many buyers flocked back to the market after the Circuit Breaker period. Singapore shuttered under a two-month lockdown in April to prevent the spread of the coronavirus in the community, during which resale transactions plummeted by more than 40 per cent q-o-q in Q2 2020.
Sales subsequently rebounded from June. According to the HDB public housing data for the third quarter of 2020, 7,787 units were transacted, 127.3 per cent higher than the 3,426 units in the preceding quarter (Chart 4). On a year-on-year basis, resale volume rose by 24.3 per cent from 6,264 units in Q3 2019. Based on HDB data from data.gov.sg, Q3 2020 was the strongest quarter sales on record since Q3 2010 when 8,205 units were sold. For Q1-Q3 2020, 17,106 units were sold, slightly lower than the 17,375 units sold in Q1-Q3 2019. Demand for resale flats remained elevated above 2,400 units for four consecutive months since June 2020 (Chart 5).
Chart 4 Volume rebounded after Circuit Breaker
Chart 5 Volume remains above 2,000 units for 4 months
The stellar sales indicate that demand is considered healthy in spite of the pandemic. Some demand could have been drawn from the Build-To-Order (BTO) market. Many BTO flats from recent launches were slated to be completed in four to five years’ time and the long waiting period drove some buyers to the resale market especially for couples with urgent accommodation needs. Many BTO launches were also heavily oversubscribed and unsuccessful candidates may have bought resale flats as an alternative.
The pandemic and economic uncertainties have not stopped the upgrading aspirations of Singaporeans as sales of new flats continue to rise this year (Chart 6). Last quarter, 2,119 new flats (<10-year-old) were sold. They also constitute a higher proportion of total sales, rising from 25.9 per cent (836 new flats) in Q2 2020 to 28.7 per cent in Q3 2020. The proportion was 21.3 per cent (1,246 new flats) in Q3 2019.
Chart 6 Proportion of new flat transactions (<10-year-old) continue to rise amid the pandemic and economic uncertainties
Many owners sold their flats this year despite the uncertainties in the macroeconomy and job market. The rising transactions could be in tandem with more flats reaching the Minimum Occupation Period (MOP) in recent years. Owners continue to sell their flats immediately after MOP to lock-in the returns quickly when their flats are still new. Many families upgraded to private homes or bigger flats in recent months. Others sold their flats to avoid the Additional Buyers’ Stamp Duty when they purchased a new private home, having moved in with their parents or rented elsewhere temporarily.
Prices of new flats rose at a faster rate of 5.4 per cent from Q3 2018 to Q3 2020 when compared to the 3.4 per cent increase for all flat types (Chart 7). Prices of new flats have also increased 3.7 per cent from Q2 2020 to Q3 2020, higher than the 2.9 per cent clocked for all flat types over the same period.
Chart 7 Median prices of new flats rose faster than the island wide median price from Q3 2018 to Q3 2020
Sengkang, Punggol and Yishun had the highest number of new flat transactions in Q1-Q3 2020 (Chart 8). Many towns saw positive price gains this year when compared to last year, with new flats in Choa Chu Kang experiencing the highest 27.3 per cent y-o-y increase.
Chart 8 Sengkang, Punggol, and Yishun had the highest number of new flat transactions in Q1-Q3 2020
Resale transactions of HDB flats in mature estates rebounded strongly last quarter. The total number of transactions surged by 133.7 per cent from 1,323 units in Q2 2020 to 3,092 units in Q3 2020 (Chart 9).
Chart 9 Volume rebounded strongly
The most popular estate was Tampines with 557 units transacted last quarter. This is followed by Bedok with 445 transactions and Ang Mo Kio with 301 transactions in Q3 2020 (Chart 10).
Chart 10 Tampines and Bedok were most popular among buyers
The average price of flats was highest at Bukit Timah at S$731,077, followed by Bishan at S$630,499, and Central Area at S$617,476 in Q3 2020 (Chart 11).
Chart 11 Flats in Bukit Timah fetched the highest price
Flats in 10 of the 15 estates saw a quarterly increase in average prices in Q3. Resale flats in Clementi rose the most by 19.5 per cent, followed by Bukit Timah by 17.7 per cent.
Resale transactions of HDB flats surged 125.4 per cent last quarter from 1,903 units in Q2 2020 to 4,290 units in Q3 2020 (Chart 12). The increase in transactions was observed across all non-mature estates with the largest increase in Punggol (199.5 per cent q-o-q) and Sengkang (160.4 per cent q-o-q).
Chart 12 Sales surged 125.4% q-o-q
The most popular non-mature estates were Sengkang (677 units), Punggol (599 units), Yishun (512 units), Jurong West (449 units) and Woodlands (435 units) (Chart 13).
Chart 13 Sengkang and Punggol had the most transactions
The average price of flats was highest at Punggol at S$464,876, followed by Sengkang at S$453,965, and Hougang at S$447,968 in the third quarter of this year (Chart 14).
Chart 14 Punggol flats fetched the highest price
Flats in 9 of the 11 estates saw a quarterly increase in average prices in Q3. Resale flats in Bukit Batok rose the highest by 10.1 per cent, followed by Jurong East by 6.9 percent and Bukit Panjang by 4.7 per cent.
According to the SRX Rental Index, rents of HDB resale flats rose 2.0 per cent q-o-q in Q3 (Chart 15). For the first three quarters of this year, rents dipped 0.1 per cent.
Chart 15 Rental index rose 2.0% q-o-q
According to the HDB public housing data for the third quarter of 2020, the approved applications to rent out HDB flats decreased by 22.2 per cent from 10,539 units in Q2 2020 to 8,196 units in Q3 2020. Compared to Q3 2019, the number of approved applications was 31.7 per cent lower than the 12,006 units (Chart 16).
Chart 16 Rental applications continue to decline
Strong housing needs from some non-construction firms and Malaysian workers returning to work in Singapore after the border reopened in August helped to mitigate the steep decline in leasing demand caused by the reduced inflow of foreign workers in some sectors.
Some employers were actively relocating their workers from dormitories to prevent them from being infected by the coronavirus and avoid the hassle of observing stringent regulations imposed in some dormitories. There was also an increase in demand for housing in residential areas located near selected industrial estates.
In light of the challenging employment climate and travel restrictions, the leasing market may remain soft with some rental price weakness in the coming months.
Chart 17 Summary of HDB resale transactions and average resale prices for Q3 2020
Table 1 Market projection
Looking at the scale of the market disruption caused by the Circuit Breaker and the depth of economic scars from the pandemic, many market watchers were expecting the property market recovery to be long and arduous. The HDB resale market has instead averted a major price correction or market collapse this year.
However, the dawn of a market recovery may not have arrived as a confluence of economic challenges remains – the risk of a global economic slowdown, a grim employment outlook and adverse impact of the withdrawals of government support measures for businesses.
Nevertheless, tailwinds from strong upgrader demand remain firm and interest rates at new cyclical low levels may continue to prop up sales demand and sustain home prices in the near term.
Therefore, we are cautiously optimistic that around 20,000 to 23,000 resale flats could be transacted this year. Prices may trend between 1.5 and 3.5 per cent for the whole of 2020 (Table 1).
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