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March 15, 2023

HDB Resale Volume Fell In February Amid Cautious Sentiment And Impact Of September Cooling Measures

By Wong Siew Ying 

Against a backdrop of ever-rising resale prices, high interest rates, and slower global growth outlook, buyers in the HDB resale flat market appear to have turned more cautious, taking a longer time to deliberate their options.

The HDB resale volume declined in February following three straight months of growth. Transaction data showed that 1,845 HDB resale flats were transacted in February, marking a 27.9% fall from January and a 2.6% drop on a year-on-year basis (see Chart 1). This is the lowest monthly resale volume since 363 flats were resold in May 2020 – during the circuit breaker which was implemented to control the spread of Covid-19 outbreak.

Of the 1,845 resale transactions in February, about 60.8% of the flats resold are in mature towns. During the month, Punggol, Woodlands and Yishun led sales, with 164, 154, and 150 resale transactions respectively.

Anecdotally, some of PropNex’s salespersons observed that while overall demand remains fairly stable, would-be buyers have become more cautious about putting in their offers amid market uncertainties and price resistance remains high – which could have put some pressure on the resale volume in February.

It was announced in this year’s Singapore Budget that eligible first-timer buyers of resale flats can receive higher CPF Housing Grant, with the grant amount increasing by up to $30,000, from the current maximum $50,000 to $80,000. Market observations suggest that there is an increase in first-time buyer enquiries for 3- and 4-room resale flats, following the Budget announcement.

However, some buyers may need some time to come to a decision in view of the firm pricing of resale flats, after prices booked substantial gains over the last couple of years. As per the HDB Resale Price Index, resale flat prices have posted two double-digit increases in as many years - rising by 10.4% in 2022 and 12.7% in 2021.

Owing to the thinner transaction volume, the average price of HDB resale flats had trended downwards slightly from about $558,500 in January to just over $551,600 in February (see Chart 1). Marginal declines were also observed in the average prices of 3-, 4-, 5-room and Executive flats (see Table 1) from January to February. The month-on-month down trend was also reflected in the average resale flat prices of 3-room to 5-room flats in mature towns as well as 3-room and 5-room flats in non-mature estates (see Table 2).

The slight price decline for 5-room could be due to a combination of price resistance setting in and the effects of the September 2022 measures working through the market. In particular, the 15-month wait-out period likely helped to moderate the demand for larger resale flats, as those who have sold their private homes are kept out from buying them. (The 15-month wait-out period restricts certain private home owners from purchasing a resale flat following the sale of their private home.)

Generally, PropNex expect overall HDB resale prices to remain relatively resilient as many sellers are likely to hold on to their asking price in view of the high cost of replacement home. Some flat owners who will be taking possession of their newly completed homes this year, may be willing to adjust their price expectations slightly, depending on demand for their flat.

As per transaction data, about 41.1% of resale flats sold in February were priced at below $500,000, compared to 40.9% in January. Meanwhile, about 57.6% of the flats resold in February were transacted at between $500,000 and just under $1 mil, on par with the previous month. The proportion of resale flats sold for at least $1 million accounted for about 1.3% of February’s transactions – down from 1.6% in January (See Chart 2).

There were 24 HDB resale flats that were sold for at least $1 million in February (see Chart 3), falling by 40% from 40 such transactions in January. February’s figure of 24 units is the lowest since April 2022, where 22 “million-dollar” resale flats changed hands. The decline in the number of such transactions could be attributed to the impact of the 15-month wait-out period.

Since the September 2022 measures, the sales of “million-dollar” resale flats have eased somewhat. We think it is also possible that the approvals granted by the HDB on appeals for waivers of the 15-month wait-out period among some private home owners could have contributed to the sale of such resale flats in the last few months. It remains to be seen if we will see a sustained drop in the number of such transactions over the course of 2023. In the first week of March, there were 8 HDB flats resold for at least $1 million.

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