Enhanced CPF housing grants boosted HDB resale market in H2 2019

More older flats were sold over the past few months and the prices of older flats have also increased.

The HDB resale market staged a surprising turnaround in H2 of 2019 as both prices and sales volume rebounded after a series of policy changes were implemented in recent months, said report by Orange Tee & Tie.

HDB resale prices recorded a second consecutive uptick of 0.5% in Q4 2019 after rising marginally by 0.1% in the preceding quarter. Sales volume in 2019 increased to 23,714, from 23,099 in 2018. 

Also Read: HDB resale prices dipped 0.3% in December 2019

Policy changes included the enhancement of the central provident fund (CPF) housing grant to increase overall housing affordability of Singaporeans. Buyers were also allowed greater flexibility in using CPF to buy older flats.

The cumulative effect of multiple policies seemed effective in mitigating further price falls arising from concerns surrounding the lease depreciation of older flats as well as the increasing housing supply. More older flats were sold over the past few months and the price of older flats have also increased in some housing estates, noted Orange Tee & Tie.

For mature estates, the market performance was a mixed bag in Q4. The number of towns that saw a fall in demand was almost equal to the number of towns that saw an increase in demand. The largest increase was in Pasir Ris, with a 28.4% jump to 31 units, followed by Tampines, with a 7.7% growth to 25 units. Toa Payoh also saw a large increase of 14.8% to 24 units.

For non-mature estates on the other hand, resale transactions rose across many towns. Bukit Panjang saw the largest QoQ jump in transaction volume with a 41.6% leap to 64 units, followed by Punggol which sold 45 units, an increase of 29%. Sengkang also sold 26 units, an 8.7 jump.

The HDB rental market continued to strengthen in Q4. The number of approved applications to rent out HDB flats rose slightly by 0.6% QoQ to 12,079 units in Q4 from 12,006 units in the previous quarter.

As of September 2019, there were 57,224 HDB flats rented out, a 1.3% increase over the previous quarter. The increase is within expectations as more flats are now eligible to be leased after reaching their five-year MOP.

Barring any unforeseen circumstances, the positive impact of the recent policy changes may continue to create demand in the secondary market. With more flats reaching their Minimum Occupation Period (MOP) this year, Orange Tee & Tie expects more homeowners put up their units for sale and upgrade to private properties or bigger flats.

Orange Tee & Tie notes that based on historical data, there seems to be a strong correlation between the number of younger flats being sold and the number of flats that have reached their Minimum Occupation Period (MOP) in that year. 

The correlation suggests that the number of younger flats being sold may rise in tandem with more flats projected to reach MOP this year. Many homeowners could be keen to put up their units for sale and upgrade to private properties or bigger flats, said the report.

About 24,000 new flats are projected to reach their MOP in 2020, according to HDB data from the Singapore government.

Sales volume may be stronger this year, possibly around 23,000 to 25,000 transactions. Prices of resale flats may stabilise or rise further, albeit at a modest pace of below 2% this year.

However, the swift increase in housing supply could create a surplus that may slow down the rate of price growth for resale flats especially in the newer housing estates, noted the report.