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HDB resale prices in 2Q18 rose (0.1%) for the first time after nine quarters, hinting at a possible bottoming-out of HDB resale prices. Demand for resale homes remained strong as volume increased by 33.3% quarter-on-quarter (Q-o-Q) to 5,941 transactions.
The strong demand for resale homes could be supply-driven as more units had been completed in recent years and being put-up for resale after they reached the five-year MOP (Minimum Occupation Period). This correlation can be observed since 2016 where resale volume rose in tandem with the increased HDB flat completions in 2011. The number of completions spiked 124% from 6,902 units in 2008-2010 to 15,456 units in 2011-2013. Resale volume is expected to rise in the coming years as an avalanche of 25,323 HDB flats were completed from 2014-2017 and will reach MOP from next year.
We feel that demand for HDB resale flats could be sustained as the current cooling measures may deter some HDB upgraders from buying private condominiums and they may turn to the HDB resale market instead. The increased cash or CPF outlay, as a result of the stricter Loan-To-Value limit, could be hefty for HDB upgraders who tend to be more price sensitive. Some may upgrade to a bigger HDB resale flat and apply for an HDB loan instead. More displaced enbloc owners are currently buying larger HDB resale flats as their replacement homes due to the price affordability. As of 2Q18, we have already seen a sharp y-o-y (year-on-year) increase in sales of 5 room (11%) and executive flats (18%).