In Q3, HDB resale prices increased by 2.5%, with more than half of apartments now sel

In Q3, HDB resale prices increased by 2.5%, with more than half of apartments now selling for S$600,000 or more

In the public housing market, strong demand and limited supply drive momentum and increased sales volume.

October 1, 2024

CONDOsingapore.com

Due to strong demand and still tight supply, Housing and Development Board (HDB) resale prices increased 2.5% in the third quarter of 2024.

According to HDB flash estimates released on Tuesday (Oct 1), the increase in flat prices comes after a 2.3% increase in Q2 and is greater than the 1.3% increase in the same period last year.

According to Christine Sun, chief researcher and strategist at OrangeTee Group, it is also the fastest growth since the third quarter of 2022, when prices increased by 2.6%.

In the third quarter, the number of resale flat transactions increased by 20% year over year to 8,035 units as of September 29.

According to Wong Siew Ying, head of research and content at PropNex, this would make Q3 one of the best quarters for the public housing resale market since Q3 2021, when 8,433 resale apartments were sold.

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With 328 deals, a record number of million-dollar transactions were recorded in Q3, up from 236 in Q2 and 128 in Q1, according to Sun.

A total of 747 apartments sold for more than $1 million in the first nine months of this year. In contrast, only 469 of these sales were made during the entire year 2023. Lee Sze Teck, senior director of data analytics at Huttons Asia, anticipates that this year will see more than 1,000 million-dollar flat sales.

The rest of the market is catching up, even though million-dollar apartments still make up a small percentage of total sales. Wong of PropNex noted that apartments sold for more than S$600,000 now make up over half of all transactions, up from 45.7% in the prior quarter.

According to Lee of Huttons, the average cost of every kind of room increased. The average price increase for four-room apartments was the highest at 3.4% to S$638,205, while the smallest was for five-room apartments, at 1.5% to S$734,488.

The average price of resale apartments increased by 2.9% overall to S$629,856.

With the Q3 spike, price growth for the first nine months of 2024 is 6.8%, which is higher than the 4.9% growth for the entire year 2023.

According to Lee, the number of transactions for the year so far is 22,455 units, which is 11.2% more than the 20,188 units that were resold during the same time last year.

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A healthy supply-demand squeeze

HDB ascribed the increase in resale prices and volumes to "strong broad-based demand" and market supply constraints, as fewer new apartments this year than last year met the minimum occupation period (MOP).

The agency emphasised that the Q3 numbers show the state of the market before the loan-to-value limit for HDB loans was reduced from 80% to 75%. This was implemented on August 20 in an effort to calm the real estate market and promote more prudent spending by homebuyers.

According to Lee, the quicker rate of price increases in the first half of the year might have caused some buyers to experience "fear of missing out" in the third quarter. Some buyers felt pressured to purchase a resale flat right away because there were fewer listings in some HDB towns because there were fewer newly MOP apartments.

According to Mohan Sandrasegeran, head of research and data analytics at SRI, there was a surge in demand for larger apartments, especially those with four or five rooms, and those with leases starting in 2013, which may have raised resale prices overall.

Key executive officer Eugene Lim of ERA noted that some HDB upgraders may have resorted to the HDB resale market after being priced out of the private market during the third quarter.

The percentage of buyers with HDB addresses decreased from 37.2 percent in Q2 and 33.8 percent in Q1 to 28.8 percent in Q3, according to caveat data for non-landed private home transactions.

According to Lim, the decreased number of condo upgraders probably indicates that these buyers switched to the HDB market, which fuelled transactions and, consequently, prices. "There has been an increase in transactions because this group of homebuyers (also) has the money and is willing to buy million-dollar apartments."

According to Sun of the OrangeTee Group, more private home downgraders completed their 15-month waitlist in order to purchase a HDB resale flat.

Remaining high

Given the robust underlying housing demand, analysts forecast that resale prices and volumes will likely continue to be high. It's unclear how the HDB's most recent cooling initiatives will affect things.

According to Lim from ERA, some prospective purchasers are probably going to use the resale market in order to get around the strict resale requirements of the new Build-To-Order (BTO) Standard, Plus, and Prime models.

He pointed out that since the upcoming Plus and Prime BTO apartments do not have such layouts, there will be a strong demand and competitive pricing for larger five-room and executive apartments.

According to Sun of OrangeTee, this could also lead to resale apartments close to the future Prime and Plus BTO sites selling for more money because they have a lower MOP and fewer strict selling requirements.

Future interest rate reductions, according to Lee of Huttons, will result in lower borrowing costs and a larger loan amount for purchasers. "In the upcoming months, prices may rise as a result of this, giving buyers the opportunity to view HDB resale apartments in better locations."

For 2024, agencies anticipate a resale volume of 26,000 to 30,000 units. Although opinions range from 5% to 10%, prices are predicted to demonstrate firm growth.