If you monitor the Singapore property market over extended periods of time, you will realize that the market exists on cycles.
There will be times of peaks and troughs. One of the ways to monitor the trend is via the property resale price index.
Below is the most recent resale price index from the last quarter of 2017 – for both the HDB and private resale market.
The HDB resale index has been falling since the peak back in 2012-2013.
This is not surprising since the government has been ramping up new launches of BTO HDB flats in the recent past few years.
At the same time, there are measures in place to ensure the waiting time for these new flats are shortened.
All these have contributed to the strong focus and demand towards the BTO flats.
Older HDB resale flats might become less desirable as time passes.
In this article below, the journalist shares “Get an old resale flat only if you intend to live in it long-term, or want to rent it out. Do not expect to be compensated for a fading lease.”
Older HDB resale flats can still be desirable though – especially for families who are looking for a larger place (compared to smaller BTO flats) and have a great location.
A premium price is possible – but will be very dependent on the attractive factors of the HDB unit itself.
For example, I believe flats at Pinnacle @Duxton will continue to fetch a premium price – no matter how old the leases become. The beautiful design and great location – there will always be buyers who are willing to pay.
For certain segments of the market —- like retirees or people who simply believe a home is not meant to be an investment —- a HDB flat with a shorter remaining lease can also be beneficial.
But in this case, the flat is viewed is a “consumption” item and there is no expectation to profit in the future.
In the end though, all of these factors are likely to push down the prices of older resale flats – especially those beyond 40 years of age.
There is still some potential for brand new BTO flats to appreciate and for an owner to make gains from it.
However, do take note a brand new BTO flat will also require added costs for example – extensive renovation costs of between $30,000 to $80,000. This is a cost that can take away a huge chunk of any potential appreciation.
The price index for the private resale market on the other hand seems to be a lot more optimistic – with a consistent increasing uptrend.
The article shares that all locations saw price appreciation last year: core central region was up 6.2 per cent, the rest of the central region added 8.9 per cent while values in the outside central region advanced 4.4 per cent.
This was likely pushed by the developers’ increasing appetite for land that resulted in the en-bloc fever of 2017.
My personal view on this?
Developers are buying land at record prices thanks to en-bloc deals. This has set up a price expectation amongst current private property owners who are looking to sell their properties. Most are likely to ask for a higher price.
Developers are also likely to launch their new developments at even higher prices in 2018 when compared to their previous new condo launch prices in 2017 and 2016.
This is due to higher prices paid to acquire the land from en-bloc sellers.
As such, I imagine the private property resale market in 2018 to be very vibrant. More people are likely to turn to the private resale market due to perceived lower prices (compared to new launches).
New launches also require a waiting time of between 3-4 years for the development to be built.
Hence buyers who are not willing to wait for new launch private properties to be completed will be focusing their attention on the resale private market.
Now – if you are looking to exit from your private property with your gains – I believe 2018 is a good time to do so.
If you have passed the 3-year SSD period and your property has made good gains, selling your private property is a move worth considering.
Buyers could begin to flood the market – especially enbloc sellers (from 20+ condo developments in 2017 alone) and HDB upgraders.
And they might be searching for a new place to stay.
It all boils down to how you view your current existing home.
Is it a home – a place to live, that is meant to be consumed? No expectation of gains in the future?
Or is it an investment as well – where profits can be extracted in the future?
Both are equally valid viewpoints. My goal is to provide clarity through this article – so you are able to make more informed decisions.
According to Tony Robbins, clarity leads to power. And power leads to an ability to make decisions decisively.
If you are looking to enter or exit the property market – be it HDB or private – I invite you to contact me for a free assessment of your financial situation and explore the options that might be open to you.