HDB resale prices up past 9 months. What’s happening?

It is unprecedented especially when we know that Covid-19 is still a threat to people all over the world. No doubt in Singapore, we are much better off compare to our closest neighbours in terms of number of people infected, the infection especially in the community is still well managed. On the contrary, the numbers that keep creeping up are all related to property especially since 3rd quarter 2020. Isn’t it ironic?

Having been in the industry for more than 12 years and saw a few property cycles during the period, the current trend seems to be out of norm especially in a pandemic environment where people are struggling to make ends meet with job losses. I am glad that Singapore’s government was quick to intervene with measures that has so far cushioned the impact of Covid-19 especially on the well being those affected as well as the economy.

I’m not an economic expert but let’s focus on relatable, a bread and butter issue of many Singaporean, public housing. Yes…HDB resale prices have been in the doldrums for most of the decade, never kept with inflation and dampening many Singaporean hope of monetizing it as an appreciating asset based on historical events where HDB resale flat was deemed a pot of goal back in those days. And on top of that, CPF policies and accrued interests had an impact on that notion. That’s a huge topic to discuss on its own….perhaps in future blogs we will discuss.

Let’s shift back to our main agenda…HDB resale prices up for the past nine months. What factors could have contributed to such a phenomenon?

Working on the ground, I had the privilege of a first hand experience dealing with many HDB resale transactions and personally witnessed the quick rise in HDB resale prices in a relatively short time. It was more evident about a month after Singapore entered Phase 3 after the much dreaded Circuit Breaker phase we had to go through. I saw an increase in request to view resale units especially bigger units in matured HDB estates - Woodlands, Tampines, Pasir Ris.

This trend started to show an imbalance in terms of demand and supply. On one hand, ready buyers affected during circuit breaker not able to view flats to buy began house hunting as restrictions on viewing flats were eased. At the same time, HDB dwellers staying in bigger units like 5rm, EA or EM especially in matured estate, were apprehensive in putting their flats on the market although they have strong intentions to do so previously. One of the reasons was due to uncertainty in the job market. Many were afraid of new housing commitments in uncertain times. As such, supply of HDB resale flats were low relative to demand. This has an impact on not only prices but many units regardless of conditions were attracting some form of bidding war. This lead to many units having the Cash-Over-Valuation (COV) component.

Another major contributing factor was when HDB announced the delay in BTO construction timeline. Typically, a 2-3 years wait for keys to a new BTO is quite the norm but post Covid, collection of keys to new BTO can take more than 4-5 years due to lack of manpower as to Covid-19 measures take effect on construction workers building public housing. Many aspiring BTO owners started to shift focus to HDB resale market which put a strain on the imbalance of demand and supply.