How to Select An HDB Resale Property That Might Still Appreciate After 5 Years?

Singapore continues to grow as one of the most dominant business and cultural hubs of Asia, owing to its favourable business climate and overall stability. And as Singapore has grown in popularity and population over time, real estate prices have increased as well, posing challenges to Singaporean permanent residents and citizens who wish to purchase residential property.

As a result, the Ministry of National Development formed the Housing and Development Board in 1960 to provide governmental assistance and supportive regulation of residential property throughout Singapore. 

Although the Singaporean government provides numerous resources to potential property buyers, these property purchases are not without their own risks. These property buyers do have to face the risk that some HDB resale flats, which they are investing their hard-earned capital into, may not appreciate over time.

HDB Resale Process And Advice

In this article our focus is on HDB resale properties. We will present the steps needed to purchase an HDB property. Afterwards, we will compare HDB resale properties to BTO properties to explain the differences between the two. Then we will explore historical price data of HDB resale flats before offering data-supported techniques to help you purchase an HDB resale property that might still appreciate after 5 years.

Image courtesy Cos.sg

Purchasing an HDB Resale Property

The first step in purchasing an HDB resale property is to register the intent to buy on the HDB resale website and determine how to finance it. Second, after finding a property, get an Option to Purchase (OTP) from the seller. Third, decide how to finance the property. The property could be financed with cash, CPF savings, or a housing loan.

Fourth, request the value of the flat from HDB. Fifth, submit a resale application that includes supporting documents and await HDB’s approval of the documents.

Upon HDB approval of the documents, endorse the resale documents within 6 days of HDB approval. Then pay all resale fees online. Afterwards, you will receive approval of the resale application from HDB. And finally, the buyer attends a resale completion appointment as the transaction is completed.

HDB Resale Property vs HDB BTO

Two of the most common types of HDB flats in Singapore are referred to as HDB Resales, and HDB BTOs. As the name suggests, an HDB resale property is purchased from another private citizen who currently occupies the property.

In contrast, an HDB BTO is a Build-to-Order flat. This means that the BTO is purchased directly from HDB and the new owner will be the first resident to occupy the newly constructed property. While the BTO flats are brand new properties that are heavily subsidised by HDB, resulting in a lower price, these purchases typically have to be made years in advance and require patience on the buyer’s part to wait for the new property to be built. If you are fortunate enough and patient enough to purchase a BTO flat you also stand to benefit from significant appreciation on the property, as HDB resale flats tend to sell for a much higher amount than BTO flats are initially purchased for.

HDB Property Values Over Time

Although HDB Resale properties do sell for amounts much greater than BTO flats, these HDB Resale properties do not always benefit from consistent, linear appreciation. In the graph below from the HDB website, you will note that at times over the past decades HDB resale prices have enjoyed periods of growth, as well as periods of decline.

Fortunately, as of the time of this writing in Q1 2022, HDB resale flats are enjoying a period of growth in their overall price index. Singapore property market analysts have cited this growth as the result of pent-up demand for properties from buyers who have waited for COVID-19 uncertainty to clear, in conjunction with a low-interest rate environment.

Given that HDB resale properties are not guaranteed to appreciate at certain times throughout the past decades, we will now share our experiences to help you select an HDB resale property that might still appreciate after 5 years.

Lease Length On The HDB Resale Property

When new BTO flats are sold in Singapore, these properties include a 99 year lease. And over time, as the property lease decreases, the property typically becomes less valuable and less desirable in the overall real estate market. The reason for this decrease is that once the lease on the property is 60 years or lower, the government has established laws that essentially reduce the market of eligible buyers of the property.

Older HDB flats are not always given access to the Selective Enbloc Redevelopment Scheme (SERS). The unfortunate reality is that only 4% of eligible flats in Singapore are admitted to the SERS program.

In addition, once an HDB resale property has a property lease under 60 years remaining, the government limits the age of potential buyers and how much of their CPF funds they are able to use for the down payment on the property. What this means is that every year the property’s remaining lease decreases, the restrictions on possible buyers increase, creating a smaller market of buyers for the HDB resale property.

The Longer The Lease, The Better

What this means for potential buyers of HDB Resale flats is to pursue properties with the longest property leases, whenever these properties are desirable and within your budget. The longer property lease provides security and peace-of-mind for the next buyer should you choose to eventually sell. And in addition, properties with longer leases are newer and typically have more intact fixtures and construction.

Do keep in mind that the most ideal time to buy an HDB resale flat will be after the initial Minimum Occupation Period, or MOP, has passed. This means that 94 years remain out of the initial 99 year lease.

Note The Supply Of Surrounding Flats

As you are comparing resale flats and considering a possible purchase of an HDB resale property, part of your property analysis ought to include the supply of flats within a one-kilometre area around your target property.

The reason for this proximity research comes down to supply and demand. In an environment filled with HDB resale properties, the owners are going to face increasing amounts of competition. Do keep in mind that although it may be beneficial to be familiar with the price of all surrounding flats, your main points of comparison ought to be the prices of comparable resale flats specifically. Because there are different buyer restrictions and buyer demographics between resale flats and other properties, it’s important to conduct a property analysis with similar properties.

Is The Resale Flat Close To MRT Stations and Schools?

Some of the most critical and desirable elements of Singapore neighbourhoods are the schools and the Mass Rapid Transit, or MRT, stations in Singapore. This fact is especially relevant for buyers that must commute to work using public transit, and for buyers with children who want to attend outstanding schools.

If you can locate an HDB resale property whose price is not already fully maximised from its proximity to nearby schools and MRT stations, this property has much better odds of maintaining its value or even appreciating over time.

Image courtesy Cos.sg

Review the URA Master Plan

The Urban Redevelopment Authority, or URA, is a government agency that is responsible for guiding Singapore’s development over the upcoming 10 to 15 years. The URA can be a great source of information to study how areas of Singapore are likely to change over time, and which regions may receive valuable new constructions, such as schools or commercial centres.

Do review the URA to learn about how certain regions of Singapore are expected to develop, which will help ensure that you pick an HDB resale property with the potential to maintain its value after at least 5 years of ownership.

When Possible, Pursue 4 Room Flats

HDB Resale property data presented by HDB shows that 4 room flats tend to perform the best in terms of property appreciation, or are at least the most resistant to depreciation compared to 2 room, 3 room, 5 room, and executive condos.

In addition, the HDB website shows that of all applications for HDB resale properties, 4 room flats consistently receive approximately twice as many applications as 3 room flats. And 3 bedroom flats consistently receive 12-16 times as many applications as 2 bedroom flats. In other words, 3 room flats and 4 room flats appear to be some of the most desirable property on the island, with 4 room flats clearly the most popular and competed over. This demand is likely driven by the increasing need on behalf of Singaporean families to have affordable and secure housing.

Research Specific Areas And Property Types

The nature of Singapore’s property market is such that each town and region has its own unique property appreciation rates, as well as transaction history. As you seek to find and purchase an HDB resale property that might still appreciate after 5 years, a convenient and informative tool to have at your disposal is the HDB Map Services tool.

Through the use of this tool you can look up HDB resale transacted prices down to the particular block or street. And if you want to look up transacted prices for resale flats within the last 2 years based on flat type, HDB town, street name, Block No, Resale Registration Date, or Transacted Resale Price, you can also use the Resale Flat Prices tool. This tool is highly focused and will allow you to carve out specific searches based on your property preferences and personal budget.

Do keep in mind that these tools are not a solution to immediately provide you with HDB resale properties that might still appreciate after 5 years. If this were the case, other buyers would have already used these tools to ensure they were purchasing a property that would still appreciate after 5 years.

Instead, these tools are meant to provide a competitive advantage to any buyer who is serious about finding the best deal. There are thousands of HDB resale properties available for sale in Singapore at any given time, and these tools are simply another resource for you to become a maximally informed buyer and ultimately acquire the best deal you possibly can.

Difficult, And Dependent On Government Regulation

In conclusion, purchasing an HDB resale property that might still appreciate after 5 years is a difficult proposition but not an impossible one. As we saw earlier with the presented price index data, HDB resale properties have recently enjoyed a steady increase in appreciation. Do keep in mind the property’s appreciation is heavily dependent on government policies. In the past these policies have resulted in depreciation of HDB resale properties as their remaining lease time remaining decreases.

Key Characteristics To Look For

However, HDB resale properties with the following characteristics appear to be the most resilient against the prevailing trend of HDB resale property depreciation over time:

• HDB resale property with 89 or 94 years remaining on the lease.

• An HDB resale property with a limited supply of nearby HDB resale flats in order to reduce competition.
• HDB resale properties with a close proximity to schools and MRT stations.
• HDB resale properties located in areas poised to benefit from URA announced expansion and development.
• 4 Room HDB resale flats.

Disclaimer: Information provided on this website is general in nature and does not constitute financial advice.


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