Saturday, July 7, 2012

Singapore Resale flat sales are up in Q2 2012

HDB resale flat transactions are up thanks to second-time flat buyers, permanent residents and an increasing number of private property down graders attracted back to the market with the falling cash over valuation (COV) prices.

Resale HDB flats are the only alternative for families who earn more than 10,000 SGD per month since they cannot directly buy from primary HDB market. Even with that salary level, a 1 million dollar plus private property is 8.3 times the annual salary and is extremely unaffordable (yes, if you only look at current levels of mortgage interest rates they may look affordable now) so they have to buy from the resale HDB market:
“The steady rise of suburban condominium prices, including that of executive condominiums, has been another factor. With three-bedroom units in far-flung areas like Sengkang and Pasir Ris crossing the $1 million mark, buyers are turning back to HDB resale flats which offers better value for money in terms of space.”[1]
On the other hand, if the huge number of flyers falling into my post box from desperate property agents looking for an HDB to sale out is an indicator, there are still not enough resale HDB in the market to satisfy the demand.

Private property downgraders, people who sell their private properties and buy an HDB flat, are also another group of buyers feeding demand for resale HDB prices:
“The rise of private property prices has also led to another phenomenon: downgraders who cashed in the profits on their condominium units and now want to move back to HDB units. ERA’s Mr. Lim said the proportion of HDB resale flat buyers with private property address has risen to 30 per cent now, from 25 per cent last year.”[1]
Since 6,100 resale transactions were recorded in the second quarter of 2012, around 1,800 private property owners bought HDB.

Singapore HDB Flats
Singapore HDB Flats - Source : PropertyReport
Singapore Permanent Residents (PRs) who can only buy HDB flats from resale market seems to be forced to buy one thanks to ultra-high HDB rentals. As of first quarter of 2012, median rent for a 4-room HDB flat is around 2,200 SGD per month which will leak out an astonishing 26,400 SGD per year for a PR family budget. With these rent levels and ultra-low interest rates, it seems like many PRs are going to resale market. Although number of Singapore PR approvals were in decline since 2009 (no data for the year 2011), there are still new PRs and they are eager to buy resale HDB flats since most cannot afford a private condo.

[1] - Lower COVs draw buyers back to HDB resale market, The Straits Times

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