August has been full of patriotism festivities, with the much-awaited annual National Day Rally accompanied by the National Day Parade. This year, Prime Minister Lee announced a few policy changes that affect the real estate industry (which we wrote about here). It was also the month with the most million-dollar HDB flats sold – 54 units to be exact according to a flash report provided by 99.co and SRX. What were the contributing factors to this record-breaking number – and will this continue for the foreseeable future?
Million-dollar resale purchases
August 2023 saw the most HDB transactions surpassing the million-dollar mark. A few regions were more sought-after than others – 9 of these million-dollar flats were located in Bukit Merah, 8 in the Central area, 6 in Ang Mo Kio, and 6 in Kallang/Whampoa. This surpasses the previous record of 45 units in September 2022, which contributed to the September 2022 cooling measures that aimed to curb inflating property prices in the resale market.
The most expensive unit purchased was a 5-room flat at The Pinnacle@Duxton at $1.48 million. The Pinnacle@Duxton also recorded an all-time high price per square foot of $1,394 psf, with the total quantum of the unit amounting to $1.411 million.
If we look at the past 12 months in resale flat transactions that exceeded S$1 million, there is no explicit trend between the months or quarters of the year. So what happened in August that caused this spike?
Resale Market in August
Another statistic from August is the increase of resale volume by 20.3% from July, making it the second month in a row that we saw an increase in volume transacted. Distinctly, a majority of that volume came from HDB 4-room transactions, making up 44.6% of the resale flats sold.
This spike may be attributed to the exemption for private property owners who are looking to downgrade from their private properties to a resale HDB flat. Seniors aged 55 and above are exempted from having to wait 15 months before purchasing a resale HDB flat if they have sold their private property. This is only applicable if they are buying a 4-room resale flat or smaller, which could account for the inflated 4-room flat numbers. Resale prices in general increased 0.6% in August, as compared to 0.3% in July and Year-on-Year we see an increase of 7.2%.
Out of the 54 million-dollar units transacted, 50 of them were situated in estates that are closer to the city centre. This could point to a trend of buyers preferring to pay a premium for units nearer the city centre for convenience’s sake, especially for those working in the Central Business District (CBD).
Why are people buying?
Hungry Ghost Festival could have played a part – this year’s dates fall between 16 August to 14 September and buyers would have wanted to close transactions in the first half of the month to avoid viewing houses due to superstitions. The superstition include avoiding viewing houses at night as empty apartments have ‘yin’ energy which attracts spirits. Sellers should avoid opening their homes for viewings, especially come nightfall for the same reason as above. The National Day Rally fell on 20 August as well, and savvy buyers could have wanted to secure their properties before any impending policy changes or cooling measures were enforced. During this year’s rally, Prime Minister Lee announced the reclassification of HDB flats. Notable changes include an extended Minimum Occupancy Period (MOP) of 10 years for Plus flats (flats in choicer locations near MRT stations and town centres) and resale restrictions such as an income ceiling for future resale buyers of these flats.
Due to this reclassification, buyers may look towards purchasing resale HDBs near MRT stations. These are flats that would have been categorised as Plus or Prime under the new framework but are currently unrestricted as the reclassification will not retroactively affect existing flats. As a result, buyers may show an inclination to pay a premium for these flats.
Additionally, there were reports of HDB Flat Eligibility Letter (HFE) delays back in July which could have snowballed into a surge in transactions in August. Since May this year, HFE was instated to consolidate eligibility assessments for flat purchases, housing grants and loans to make it easier for buyers to understand what resources are available. It was stated that after application for the letter, it could take up to 21 days before the results, but many reported waiting longer than 30 days with no updates. Once the system was able to release a large batch of approved HFE from July’s backlog, ready buyers would then waste no time in confirming their purchases in that same month of August.
Should buyers be worried about rising property prices?
For a very long time, property prices in Singapore have been steadily increasing. To circumvent this, the government periodically releases cooling measures to put a cap on prices to ensure that they remain affordable for the average Singaporean. According to data from The Straits Times, it was observed that the resale prices experienced a growth of 4.8% from January to August 2023. This growth rate was comparatively slower than the 6.4% increase recorded during the same period in 2022 and the 9.2% increase in 2021. Hence, while August recorded a large number of million-dollar houses, the rate of price increase overall for resale flats remains slower than in 2022 and 2021. This should not be a signal that prices are increasing exponentially but may be an outlier due to a combination of different factors. A decade ago, having a million-dollar unit would have been breaking news, but in this current market climate it seems to be becoming the new norm. With rising housing prices, it could be only a matter of time before we see new cooling measures being introduced. With that said, these record-breaking transactions remain a very small percentage of the resale market. Overall market trends point to resale HDB prices reaching its peak and stabilising, and may soon start to come down.
In these current market conditions, it may be demoralising to constantly see prices escalating with no downturn in sight. As mentioned, these statistics are a product of a perfect storm of factors, and we believe that anyone can find their dream house within their budget. It is always essential to zoom out and see the bigger picture before jumping to conclusions and to make informed decisions before purchasing your dream home. Contact us now to get the advice you need in your property journey, we’re here to help!