The Impact of 30,000 Newly MOP Flats Entering The Resale Market

As a property agent, I am very keenly aware of the supply of property in Singapore. I monitor news from Ministry of National Development (MND), HDB and URA regularly.

So in the year when the HDB Resale price index hit its peak – it was in 2012.

The government was very quick to move and take action.

According to this news report on 21 Nov 2012, a total of 34,237 flats has been launched in 2012 alone!

This included Sales of Balance flats.

HDB launched seven Build-To-Order (BTO) projects on Wednesday, offering 6,463 new flats in two non-mature towns (Choa Chu Kang and Sengkang) and three mature towns (Bedok, Queenstown and Toa Payoh).

With this launch, the total BTO flat supply in 2012 will reach 27,084 units. This will be the largest BTO supply in a year since the BTO system was introduced in 2002.

Together with another 7,153 balance flats offered earlier in the March and September 2012 Sale of Balance Flats (SBF) exercises, HDB has launched a total of 34,237 new flats in 2012.

In January 2013, HDB will offer about 3,320 BTO flats in Ang Mo Kio, Choa Chu Kang, Hougang, Kallang Whampoa, Tampines and Yishun.

HDB is planning for at least 20,000 BTO flats in 2013. – CNA, 21 Nov 2012

Fast-forward to 2019

The Business Times recently published this article about the future coming trends in HDB prices.

With a significant supply of new BTO flats hitting the MOP period, there is a looming increase of eligible sellers entering the resale market.

The BT article also included the graph below which shows the increasing amount of HDB flats reaching their MOP.

The massive supply of flats eligible for resale may lead to a shift in housing demand and impact prices at certain estates.

Some areas may enjoy a pickup in marketing activities or buying interest as more flats become eligible for resale or rental after their MOP.

I deal with HDB flat transactions on a regular basis – they are my bread and butter.

Walking on the ground everyday – negotiating with both buyers and sellers – I am anticipating the following ripple-effects:

Repercussion #1: Huge Incoming Supply = Plenty of Choices

Even if only half of the owners of the incoming newly-MOP HDB flats proceed to sell their flat, it is still a huge number.

As a property agent – this is actually good news for us in the industry. This means more HDB listings and more HDB sellers for us to work with.

However, this also means there will plenty of competition for the pool of buyers. For HDB resale units – only Singaporeans and PRs are eligible to buy.

They will be spoilt for choice and can afford to be picky – it will be buyers’ market.

Repercussion #2: HDB Resale Prices Will Start To Moderate Downwards

With plenty of supply, this means HDB resale prices will start to moderate and drop. HDB transactions could actually pick up with increasing volume.

Owners will become more realistic in their asking prices.

This means attractive prices.

And attractive prices will always pull in buyers to take action – so it could lead to more interest especially in certain areas.

Based on the OrangeTee research, it might mean greater interest in the Punggol and Sengkang areas as these areas are currently being developed into a future digital hub.

Repercussion #3: Attractive Units Will Be More Highly Sought After Compared to Others

There will always exist HDB units that will have the following features:

• High floor
• Better view
• Beautiful interior

These units will be usually get the bigger offers and will be sold very quickly.

I have experienced the type of interest such listings can generate. These listings can easily attract more than 100 enquiries from potential buyers.

HDB units that are lacking in any of these 3 features will usually be less sought after. Demand will be slower. Typically these listings will attract much lesser interest.

It doesn’t mean the less desirable HDB units cannot be sold at a fair price – it means interest is much lesser.

When interest is not there – this is where agents have to be creative to attract even more suitable buyers.

Repercussion #4: Older Resale Flats vs Newly MOP HDB Flats

These recent past few years, I have seen the strong interest for the newly-MOP HDB flats as compared to HDB resale flats.

It is very common for flat buyers to enquire about the remaining lease of the flat – even before they view.

HDB has recently announced new rules regarding the CPF usage and its relation to remaining lease of the HDB flat.

Basically it will seem that for older flats – will encourage older buyers to take up – as it is easier to hit 95.

For a 25-year old HDB flat buyer – they can only buy a flat that has a remaining lease of at least 70 years old in order to be able to use CPF funds up to the full Valuation limit.

This means they can buy flats that are 29 years or younger.

With this new rules, it basically encourages:

• the young to be more careful about buying older flats
• more leeway for the older buyers to buy older flats

Such measures will definitely help to make the older flats more sellable and attractive.

There have been issues that older flats are becoming harder to sell.

Conclusion

If you are planning to sell your HDB flat – be aware that you might need to manage your price expectations. There will be stiff competition for buyers and your unit will need to compete with everyone else.

At the same time, delaying to sell your HDB flat might also not be the best idea. This is because in 2020 – an additional 20,000 more flats will be expected to hit MOP.

Remember – your flat just becomes more OLDER and not necessarily more attractive.

By the time you wish to enter the resale market – it is also likely prices have moderated downwards. Potential buyers will also get used to prices to be at a certain point and might not accept prices that they deem above their expected range.

I understand the repercussions might be hard to accept. But it is important not to fall into the trap of self-deception and believe everything will be fine.

If you are looking for clear answers and possible options to your HDB issues – I invite you to contact me for a no-obligation discussion.