Over the last few months, you might be seeing this news that the HDB resale price index went up during 2020.
After years of a slow sliding of HDB resale prices, does it mean that HDB prices has recovered?
Let’s explore the timeline since 2019
In Jan 2019, HDB resale prices has been dropping for the 6th straight year.
In April 2019, another report appears – further confirming that HDB resale prices were on a downward trend.
This remained the same in July 2019 – with small drops in the resale price index.
There was also headlines that stated the price gap between HDB resale flats and private homes continued to widen.
In January 2020, something called the “Wuhan” virus was starting to spread.
By 5th April 2020, a historic lockdown was imposed – known as “circuit breaker” – by the government.
As a property agent, I found out we were not in the list of essential services.
In April 2020, the impact from the circuit breaker was that new launches of HDB flats will be postponed.
On 15 May 2020, Minister Lawrence Wong states there is “no doubt” that construction costs will be higher.
In July 2020, there were reports of sales done by virtual viewings.
On our end, I did manage to close a deal via virtual viewings as well.
On 19 June 2020, with the start of Phase 2 of reopening – property viewings were allowed to be resumed.
This was when I got back into the full swing of action on the ground as buyers and sellers on the sidelines quickly returned back to the property market.
In August 2020, the volume of HDB transactions reached a new peak.
By October 2020, HDB resale prices was increasing at the fastest pace in 8 years.
By Jan 2021, the news are reporting that COV (Cash Over Valuation) is becoming more and more common.
Cash Over Valuation (COV) Used To Scare Off Many Home Buyers
In my past experience, hearing the word COV used to scare off many buyers.
Many people hate the idea of forking out cash – that is above and beyond the valuation that has already been confirmed.
But thanks to this pandemic, buyers are becoming more willing to accept COV as a cost if they wish to buy a ready-to-move-in home.
Cash over Valuation aka COV – the dreaded word that many home buyers used to frown upon.
Most seasoned homebuyers know this term when they buy a property especially when buying HDB resale.
It’s a guessing game as there is no value indication when they are interested in a particular property unlike the past where the seller did the valuation first.
Although they can refer to HDB websites for price reference, it’s still an anxious feeling when a home buyer is waiting for the valuation report after placing a deposit for a unit.
A typical valuation report will be released within 3 to 10 days.
What if the valuation turns out to be below the purchase price?
That’s when the buyer will know that they have to fork out the difference in cash. No CPF or loan can be utilised for COV.
Cash Over Valuation (COV) is Making a Comeback
For most newly-weds, cash is very sensitive to them as they are starting a family and reserve those for family usage.
They’d rather use CPF, loan and grants from the government for their first properties.
However, we noticed that the last quarter of 2020 (COVID -19 year), properties started to be sold in a much shorter time.
Within 1 month, 1 week or even 1 day!
Why is this so?
From my interaction with buyers and sellers, I gathered the following reasons for the comeback of COV and rise in HDB flat prices.
Take note this are based on my various conversations on the ground.
#1: Shortfall of supply
The pandemic has delayed the completion date of quite a few housing projects – both HDB and private developments are affected.
This has forced buyers who are unable to wait to turn to the resale market instead.
#2: Many buyers from EC who have growing families and needs bigger space
Quite a few EC developments have hit MOP and some of these owners are cashing out.
For some of them, their next home will be a HDB instead.
At the same time, I noticed they prefer bigger HDB flats to accomodate their growing family.
#3: New BTOs takes longer to build and not many are willing to wait
#4: PRs buying houses instead of renting
With border restrictions, alot of PRs are choosing to remain in Singapore because of work.
This has forced some of them to take a longer view of the pandemic situation.
Some of them has perhaps made the realization it was time to commit and purchase a property in Singapore.
#5: More people are looking for bigger homes
With a majority of the workforce being stuck at home, alot of people are longing for a bigger space.
The resale HDB market is one of the fastest ways to own a bigger home.
#6: Singles are also purchasing HDB flats from the resale market
I have served quite a number of singles who are looking for their own place.
For this group, they are eager to move in.
Most of them are not willing to wait hence they are turning to the HDB resale market for a chance to get their own place.
Singles also face another restriction – they are only eligible for 2-room BTO flats.
Hence, if they want bigger units like 3-room or 4-room flats – they will have to source from the HDB resale market.
Recently, I myself closed an executive apartment at Blk 314D in Sengkang at $660K in Nov 2020.
This was a record price for the block.
You can see the transaction caveated below in Jan 2021.
If you were to compare to transaction data back in Nov 2019, the last transacted price at Blk 314D Sengkang was at $588K.
Within just 1 year, the prices at this block went up by about $50K – $70K.
This rarely happens for HDB flats unless due to strong demand.
But take note that not all properties sells above valuation.
Some valuation match the selling price and it is up to the buyer whether they want to proceed with buying the property with a COV component.
It all boils down to every family’s financial means, the current demand and supply and also the economy.
COVID-19 has directly and indirectly affected all of us and the way we live.
Pandemic or not, people will always need a home. Buyers and sellers will always have their plans and goals they wish to achieve.
And this will certainly continue down the years.
Will COV trend continue throughout 2021? Or will it cease?
It’s up to anyone’s guess.
But what is clear is that 2020 and by extension 2021 will be a great time for sellers who wish to let go of their properties in the HDB resale market.
This is a great time for sellers out there.
We can sit down for a no-obligation discussion.