In a continuation of my analysis of the current market situation in Singapore, here we look at the important of the HDB resale market.

 

1.       HDB resale prices will prop up mass market condo prices

Another reason why S$600 per sq ft will be the new threshold is because of the HDB resale market.

 

Singapore is the only democratic country in the world that has a huge public housing programme – even china does not have a public housing programme that takes up 86% of all residential land. Due to the sheer size of Singapore’s public flat segment, and the tendency for the government to intervene directly in the property market, home prices in general (excluding the high-end segment) tend to swing back and forth within a manageable range.

 

2.       Resale flat prices near S$600 per sq ft in some places

The recent HDB resale transactions in March 2009 have shown that buyers are paying prices high enough to prop up the S$600 per sq ft threshold for most mass market condo projects.

 

Flat buyers are paying between S$250 per sq ft to S$330 per sq ft just to own quarter-century old HDB resale 3-room flats in suburban areas such as Yishun, Woodlands and Hougang.

 

In Kim Tian Road, which is a short drive from the Central Business District (CBD), buyers would have to pay much higher per sq ft prices such as between S$450 per sq ft to S$550 per sq ft for six-year old resale 5-room flats.

 

At Strathmore Avenue near the Redhill MRT station, buyers have to shell out at least S$530 per sq ft in order to own a five-year old resale HDB 5-room flat.

 

In fact, the highest resale price achieved in Strathmore Avenue in March 2009 was S$608 per sq ft for a five-year old resale 5-room flat.

 

For resale HDB flats further afield, such as in Sengkang, buyers still have to part with at least S$310 per sq ft (highest being S$364 per sq ft) for five- to six-year old resale flats (including 4-room, 5-room and executive flats) in March 2009.

 

3.       HDB resale prices provide the stabiliser

Thirdly, the newly introduced Lease Buyback Scheme (LBS) will be the stabiliser to the new price point.

 

According to the latest news on 20 April 2009, 200 flat owners have already applied to take advantage of the HDB Lease Buyback Scheme. It appears that as long as the Singapore population continues to age, more, rather than fewer people, will opt for that scheme as it provides stability and security for flat owners who are above 62 years of age.

 

In fact, according to the same news, the Singapore government is studying the feasibility of extending the BS in the future to owners of larger flats including 4-room and 5-room flats.

 

While such a scheme provides the safety net for the older folks and the lower income earners in bad times, in good times, flat owners in general (who did not sign up for LBS) will have more financial options. Some 3-room flat owners will choose to sell their flats outright to an ever growing pool of buyers and enjoy the capital gain rather than getting the annuity payments over a long period of time. This means that prices for mass market homes will never crash, even at the depth of the worst recession.

 

Prepared by Sam Gian, Independent Real Estate Sales Consultant. Article was first published in the Singapore Property Market Review, April 2009.

 

Related Categories: Daily Property News and Updates, Market Reviews & Market Outlooks

Tags: HDB, HDB resale, Hougang, kim tian road, Lease Buyback Scheme, ms-singaporehdb, resale flats, Sengkang, Strathmore Avenue, Woodlands, Yishun

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