HDB released their fourth qurater 2017 property market information and the Resale Price Index tracked by them showed a fall of 0.2% on a quarter on quarter basis and a fall of 1.5% on a year basis.
The quarterly decline is less negative than the -0.7% registered in 3Q2017, but the decline of 1.5% on a yearly basis is the most severe since 4Q2015 when prices fell 1.6% y-o-y.
Between 4Q2013 and 4Q2017, there has been only one quarter of positive yearly increase in 3Q2016, and that was for only 0.1%.
Between the peak index reading of 149.4 in 2Q2013 and 4Q2017, the index has fallen 11.2% and there has been no sign that prices will improve.
The performance of HDB resale flats is a divergence from the private residential market where prices are beginning to look up.
I can think of a few reasons why HDB flat prices are falling.
- HDB flats are generally getting older in Singapore. This is an undisputed fact and for every year that goes by, the value of it to potential buyers decline. Taken as an aggregate, the HDB resale price index will reflect the general ageing of properties. If the government can add more new flats (with new 99 year leases) to the market index, then the HDB resale price index might start to pick up.
- Comments by Minister of National Development Lawrence Wong that not all old HDB flats will be eligible for SERS. In a ‘guided’ market such as in Singapore, comments by key people hold weight and can cause buyers and sellers to adjust their behavior to make the most of the situation. The ‘warning’ was given in Mar 2017 and that only exacerbated the continued decline since late 2013.
- The government took back land from some ‘lessees’ in Geylang after their lease expired. This happened in June 2017 when the government took back 191 homes in Geylang Lorong 3. The Singapore Land Authority is presently going through the process of taking back the land. What will they do with the land? Where will the past owners go? No one knows for sure.
So where does that leave the HDB resale market? Most analysts are forecasting prices to rise, but my take is that with the sudden consciousness of HDB flats not being an asset with continually rising prices, most buyers will be more careful in plonking down large sums of money.
The price mismatch between what buyers are willing to offer and what sellers are willing to accept is likely to cause the price gap to widen.
With the winding down of a 99 year lease, my suspicion is that there will be more down than upside for prices.