Hmm! To Upgrade Or Stay Put In My HDB Flat?

If you are one of the 30,000 to 35,000 HDB home owners that have reached your five-year minimum occupation period (MOP) for your Built-To-Order (BTO) flats, congratulations, you are now eligible to take the next steps forward in deciding whether to upgrade to another bigger HDB resale flat, stay put, or perhaps taking the next steps to dip your feet into the private residential home markets.

If I want to upgrade to a bigger HDB resale flat, or stay put

Let’s say you have made your decision, and you want to stay put, and enjoy a potential rise in your household net worth, then by all means do it and enjoy the limited period of upward resale flats pricing environment. But you do need know that there is a “time decay” attached on your HDB flat lease period when you first took possession of your keys to the flats.

However, if you plan to upgrade to a bigger HDB resale flat, you may want to look at the following table and chart and perhaps decide whether it would make sense to sell your “MOPed” flat now, and buy another bigger-sized flat at the current rising resale flat prices environment.

Table 1: Change in HDB resale prices since 2016

Source: HDB

Chart 1: HDB Resale Price Chart since 1990

 Source: HDB

As you can see from both Table 1 and Chart 1 where the former showed sharp upward relative price change momentum in the HDB resale flat prices since the pandemic year of 2020 to 2021, and the latter which showed a significant spike in the HDB resale price index since the early part of 2020 (circled in red).

With both sets of illustrations shown, do you foresee that HDB resale prices will still continue to rise at a sustainable upward trend in view of the current high interest rate environment, and the increasing talk of an impending recession coming within the next two to three years?


But, in the first place, how did this sudden spike in HDB resale prices happen

Well! A couple of things happened. First, you might have read about news during the later part of the pandemic years, HDB had to compensate some BTO flat buyers as the expected completion dates of the affected BTO flats were delayed due to manpower shortfalls, and material shortages as the global supply chains continue to face delays and disruptions.

Although HDB has also came out to clarify that HDB BTO flat buyers from about two thirds, or 17 of the 25 HDB BTO projects faced additional waiting time of about six months or less, there are still a number of BTO flat buyers who chose to give up waiting and decided to turn to the resale flat prices, thus contributing to the rise in resale flat prices.

Second, as outlined earlier, there will be an expected onrush of many potential HDB resale buyers, numbering close to 30,000 to 35,000 “MOPed” flat buyers in 2022 coming in to purchase bigger flat sizes at higher resale prices. Therefore, with the huge demand of resale flat buyers competing for a limited supply of HDB resale flats, ie. the five-room and above type of resale flat sizes, this would have resulted in the HDB resale prices moving higher.


Have HDB resale applications kept pace with the rising HDB price environment

Chart 2: Number of HDB registered resale flat applications since 2009

Source: HDB

*Assuming that we multiply by four times the number of HDB resale flat applications for 2022 (1Q22 recorded 6,934 HDB resale flat transactions).

Based on the illustration on Chart 2, and especially if we were to eyeball on the brown colour bar column towards the extreme right-hand side of the chart (1Q22 – 4Q22), if we were to assume that the same pace of 6,934 HDB resale flat applications in 1Q22 were to carry over to the remaining quarters of 2022, it appeared that the recent rise in HDB resale prices seems to be quite supportive by the expected continuing rising number of HDB resale flat applications.


Has our average monthly household income kept pace with the rising resale flat prices

Chart 3: Average Monthly Household Income from Work (Including CPF)

Source: Singstat


Table 2: in Change average monthly household income

Source: Singstat

*Please note that for the time periods for the HDB resale prices were taken from 1Q2013 to 1Q2022 (first row) and 3Q2020 to 1Q2022 (second row) respectively.

As you can see both the chart and table above, our average monthly household income for a Singaporean family of four have more or less stay stagnant, or flat, whatever you may want to term it as, regardless of whether it is on a relative basis or on a cumulative average growth rate (CAGR) basis, especially when looking at the time periods of between 2020 to 2021.

Looking closer at the figures, if were to compare to change in our average monthly household income against the change in the prices of HDB resale flats during 1Q2013 to 1Q2022 and 3Q2020 to 1Q2022 respectively (shown in yellow-coloured columns), it appears that the pace of price growth at 2.5 per cent for HDB resale flats during the period of 3Q2020 to 1Q2022 appears to outpace the CAGR growth in the average monthly household income at 1.8 per cent.

However, back in 2013 to 2021, it appears that with the average monthly household income growth of 3.0 per cent at that time seemed to pace quite comfortably ahead of HDB prices at less than 1.0 per cent on a CAGR comparison.


But, are there similar spillover effects in the private residential markets

Source: URA

Source: URA

*Estimated figures for 2022 (BT article dated March 15, 2022)

As you can see that while private property prices seemed to be heading upwards, the number of transactions for new launches appear to hit towards a plateau, and appears to be moving downwards. However, due to seasonal effects, and the ongoing endemic period in Singapore where there have been periods of surges of the Omircron virus variants, this has resulted in the limited number of new launches being debuted during the first quarter of 2022. Therefore, the start of 2022 might not show the complete picture of the private residential market transactions and prices for the entire year.

Then, there is also a question of price sustainability as in whether taking into account a potential slower global economic growth, more property cooling measures if prices were to continue to trend upwards, and a potential recession that has been widely forecasted by many global market watchers, there are questions of whether private home prices in Singapore will continue to sustain at the current sharp upward price trajectory?


Are monthly average household income supportive of rising private home prices

Let us compare the figures

Source: Singstat and URA

*Please note that the time periods for the URA PPI data was from 1Q2013 to 1Q2022 for the first row and 3Q2020 to 1Q2022 for the second row respectively

Looking at the shaded columns and looking closer at the pandemic/endemic periods of 2020 to 1Q22, and comparing on a cumulative average growth rate (CAGR) basis, it appears that private home prices (2.2 per cent) appear to have outpaced the growth of the average monthly household income (1.8 per cent) by about 40 basis points or 0.4 percent.

However, back in 2013 to 2021, the average monthly household income derived from work seemed to pace comfortably ahead private home prices during that time period.


Are Private homes and HDB resale homes now too expensive?

This a million-dollar puzzle that everyone seems to be confused or feeling a bit anxious as time inches by.

Not to worry! There is still help available. When faced with such dilemma, it might be best for you and your partner to leave such questions in the safe hands of trusted and good quality real estate professionals who can be the best persons to guide you, advise you on the most appropriate approach of dealing with your real estate dilemma, and walking you through with you in your entire real estate journey from the search, right down to when you finally settle down in your next dream home.

In our years of advisory work, we discovered that if you can receive sound advice through a proven advisory process, you will be be to make a sound property decision. If you are curious to find our how such a process can benefit you, you are most welcome to me and Hock Meng to guide you through as you embark on your next real estate journey. We have a proven systematic advisory process; right from the beginning, understanding and knowing your property buying objectives, right down to when you have finally gotten your dream home.

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