PUBLISHED Thursday, March 30, 2017
Stabilising prices and increased CPF Housing Grants for first time buyers make it a good time to enter the market.
Housing and Development Board (HDB) flats houses 80% of Singapore’s population and are often first choice of housing for young families. And often, a common question may come across this group of buyers: Build To Order (BTO) flats versus resales flats, which is the better option?
While BTO flats are cheaper but comes with a longer waiting time of about three to four years before home buyer can move in. Resales flat are price higher and shorter sales process. Thus buyer choice are heavily depends on their individual circumstances. Now, with stabilising resales prices and increased Central Provident Fund (CPF) Housing Grant, resale flats have become an increasingly attractive option recently.
In 2016, the number of HDB resale transactions have increased by 8 percent to 20,813 units Among these transactions, there were 20 units that transacted above S$1 million mark. This prove that resale flat are still popular choices among the buyers.
Big Price drops unlikely
Prices have fallen from their peak in 2013, and have since stable in mid 2015. It is unlikely that HDB resales prices will drop drastically in near future as buying signal is already picking up at current price level. Given the limited downside risk, buyers are more confident in their purchase.
And, HDB resale transaction are available in public. Buyer need not be afraid that they paid high price premium above the flat’s valuation. They can easily check against HDB’s database, prior to any negotiations. Armed with available information, buyer will have a firm basis to centre discussion.
Recently, Finance Minister Heng Swee Keat announced during the Budget 2017 that the number of grants available to first-timer increased with immediate effect. The Family Grant was S$30,000 to S$50,000 for the first timer buying a four-room flat or smaller resale HDB. While S$40,000 for those buying a five-room or larger resale flat. Together with the additional CPF Housing Grant and Proximity Housing Grant, would add up to S$110,000 for the first-timer. These first-time buyers will need to make sure that they are covered within their home just in case an accident happens. This is where a home warranty can be highly beneficial, and those who need to know more can read here to gather more knowledge for themselves.
Effectively, this makes resale flats more affordable for buyers. Therefore, this makes resale flat more affordable for buyers, which increases a sales trend up for the resale market. Now buyers can capitalise on the higher grant amount in deciding between a BTO flat and a resale flat.
Should I sell my flat now?
Sellers may have reluctant to put their unit on the market as prices are lower than the peak of about 3 to 4 years ago. However, current market conditions are still favourable for sellers. It goes without saying that in different countries buying and selling of flats, apartments, houses, etc. is a contrasting process. For instance, in America, they would look for help on such websites as House Buyers of America, whereas in Britain they will go for more localised agents that can help them.
HDB prices were rise from 2005 to 2013, a total increase by a total of 104 percent over 31 quarters. The recent decrease in prices was only 9.9 percent over 14 quarters. Majority of the seller will still make a healthy profit even if they were to sell today, especially theirs is a BTO flat.
Its a good opportunity for sellers who wish to make a switch upgrade to a private residence. Private residential prices have been on a decline and abundance of supply in the market. Many development are selling at an attractive prices and promotional package with deferred payment scheme makes house purchasing much easier.
Contradiction, seller may think that prices would increase after they sold their unit. However, it is unlikely as government expects HDB resale prices to remain stable due to the healthy supply of resales flats.
The mortgage servicing ratio (MSR) remind buyer to keep their monthly mortgage repayments to 30% of their household income, which cap the maximum loan amount available to them. Thus any price increase will tied to income growth.
Given that Singapore’s economic growth is forecasted to be in the region of 1 to 3 percent in 2017, any price increase would be a gradual process, instead of a sudden spike.
With the increase in grants, there will be more buyers looking to buy a resale flats. Selling process will be much easier and shorter. However, sellers should be careful on their asking price in the view of higher grant amounts, especially the changes is not backed by transaction data.
No perfect time
Moving forward, HDB resale market may not have huge changes. However, we are expecting a 10% increase in resale volume because of the higher housing grant 2017. We might see a modest uptick range of 0.1% to 0.5% for the year.
Unlike in the private residential market, where emphasis is depending on timing for investment purposes, while HDB resale market is less speculative. The advise for buyer and seller is, focus on need instead. There is simply no perfect or best timing to enter or exit the HDB resale market.
You may contact our specialise real estate consultants office no +65 61008160 for more enquiry.
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