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Oct 31

Will prices drop in 2014, 2015, 2016…?

As you can see in the chart, Singapore HDB flat prices DOUBLED in last 5 years due of insufficient supply of new flats. Would you like to see prices dropping in the next 5 years to the early 2000s value? Think about owners who worked hardly to pay current flats which will lose half of value.

Check this out: HDB Median Resale Prices by Town - Excel file compiled by me showing price trends PER TOWN since 2007. Updated 24 Jan 2014.
The gaps in lines are because HDB do not provide median price if less than 20 flats were transacted per quarter. The chart may help (or not) to see if the prices will grow or fall in your town! I am waiting for feedback…

HDB resale flat prices 1990-2013

Chart legend

Demand for apartments in Singapore was high but felt sharply at 1997 Asian Crisis, about 80.000 flats were under construction and were completed in the following years, resulting in about 40000 unsold flats in the year 2000. 2003 SARS affected economy too, so 5 years were necessary to clear the stock of unsold flats.
Queue selling system (Registration for Flat) was suspended, Build-To-Order was introduced, and Walk-In-Selection was used temporarily to clear the stock of unsold flats. Resale prices were constant because new flats were available immediately.
The stock of unsold flats vanished, Walk-In Selection ended in 2007 and was replaced by Sale of Balance Flats that is only twice per year and the applicant ratio is always over 1:10. Buyers who do not want to wait 3-4 years for BTO completion are forced to go in resale market. Resale prices started rising.
HDB failed to anticipate economy recovering, and ramped up the BTO supply too late and too slow, 5500 BTO flats in 2007, 7800 in 2008, 9000 in 2009 (global recession), 12000? 16000 in 2010, 22000 25000 in 2011, 25000 27000 in 2012, plus some DBSS and EC since 2010, but still not enough to not cope the demand. (strikethrough numbers are initial numbers announced at beginning of year).
Rising supply of BTOs became visible in 2012, causing a small reduction in resale prices growing rate.
HDB lowered minimum application rate to 50% in 2011 (was 70% or 80%, not sure), but since mid-2000s to 2013 no BTO had application rate under 100% (except elderly Studio BTO flats).

SOLUTION to stop prices from rising: launch at least 30000 units of BTO per year, until the applicant ratio drops under 1:1, and set bigger price difference between mature and non-mature estates to harmonize the applicant ratio and avoid oversubscription of certain projects! The leftover flats could be sold later through SOBF.
Also, HDB should NOT increase MOP because this is lengthening price rising.

 

Will prices drop?

Analysts predicted that the prices in Singapore will start dropping in 2012 (example), as they predicted in 2011, 2010 too. In my forecast, resale flat prices will NOT fall even in 2012, the growth will be slowed down as COV felt a little, but will continue to grow for as many years as HDB refuse to build ahead of demand, forcing us to wait 4 years via BTO!
The cooling measures from 2011 such as Minimum Occupation Period of 5 years, just make people angry as they can sell their flats only after 9 years after applying for BTO. Stupid MOP cause less flats to enter resale market in the coming years, the number of people not eligible for buying directly from HDB (for example PR) is growing.
Most of BTOs launched in the 3 years 2009, 2010, 2011 will be completed in only 2 years 2013-2014… ~ 40000 flats to be completed in 2014 alone + 5 years MOP = this may lead to a market crash in 2019. I am not saying that prices will not start to fall earlier, but the biggest price fall can be in 2019.

Note: The above text was written by my personal research at end of 2011. Later I found a similar research on h88.com.sg dating from Feb 2012, that confirm my hypothesis  They say that prices will drop no sooner than 2017! Oh dear…

During 2014, prices are likely to be stagnant. I estimate max 1-2% fall or rise per quarter. Usually the biggest chance to rise is in Q2 and Q3.
Multiple cooling measures, such as 3 year waiting period for permanent residents to buy resale flats have created fear that the housing market may crash. I don’t think that PR have big impact on prices, AND there’s one more reason for prices to RISE in 2013-2015: few new flats will enter resale market because HDB increased minimum occupation period in 2010 from 3 to 5 years.
Prices dropped with 0.7% in Q3 Q3 and 1.3% in Q4 2013 (first drop in 5 years). Such minor drop in prices may cause panic, if many people put their flats for sale in a short period of time, this may trigger a chain reaction in price drop, OR if the panic may be just temporarily and prices may rise back in 2014… in the same time HDB may invent new cooling measures to prevent this. HDB can also invent anti-cooling measures in case prices drop with more than 10% in one year.
1.5% fall in Q1 2014. I predict that the following quarter will have max 1% drop or rise.

For more exact predictions, we need to know how much % of the resale flat buyers are PR or singles (ineligible for new flats), and how many are eligible for buying directly from HDB but choose to buy resale flats for whatever reason (waiting time for BTO, unsuccessful applications, small size of new flats, etc).
Many people blame the PR, but in my opinion they are just a small insignificant percentage. From my personal experience in chatting with website visitors, for one year, many people apply only for popular BTO projects that always get oversubscribed, fail to get a good queue number, then decide to go on resale market.

What you should know:
- Upgrading programmes and upcoming MRT lines also drive up the nationwide resale price index.
- The size of today flats may encourage people to go in resale market for flats built before 1998 (NOT SURE if this push up the resale prices, record of psf is now hold by resale flats built in 2000s).
Prices are most likely to grow in Punggol faster, due of many upcoming developments (remember that several years ago it was cheapest town?). GROW ENDED! Punggol suffered biggest price fall in late 2013, as results of over-speculation during last years.
- Prices are most likely to fall in the old 10-storey blocks of Queenstown and Toa Payoh that are getting shadowed by the new 40-storey blocks.
- Prices may fall in Bishan because this area was over-valuated during construction of Circle Line.

Affordability of HDB flats
Yes they are still affordable!
Proof: every launch, the higher priced BTOs (better locations) gets most applicants.
HDB Website shows application rate. See how 3-room remained unsold and how big is the battle for 5-room despite of higher prices. See the TRUTH about shrinking HDB flat sizes!

3 comments

4 pings

  1. Ling

    I totally agreed with you, Teoalida. I don’t see that PR as a significant cause of super high resale price.

    I’ve just completed my resale purchase recently.

    While searching then, my heart sank whatever the news announced a flat had sold with how much COV. The announcement would make owners insisting on their extremely high asking COV.

    I can understand that buyer wants to buy low and seller wants to sell high. But when high is so high, only super cash rich people will be able to buy without much hesitation. Sadly I’m not one of them… which was why I took almost a year to found one.

  2. Teoalida

    A crazy guy is trying to convince me that HDB will die, that after 2015 construction of new flats will slow down and stop some day, HDB resale prices will rise, etc. Read entire chat: http://www.teoalida.com/offtopic/chat-2013-10-04/

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