HDB resale value distorted by newer HDB flats, high-floor units in resale market: 99.co

The HDB resale value is seemingly distorted by newer HDB flats and high-floor units in the resale market, despite the Resale Price Index (RPI) recording a 1.5 per cent increase in the third quarter of this year.

RPI is calculated based on resale transactions across towns, flat types and models, as stated on the HDB website.

Property portal 99.co reported on Saturday (12 December) that while Ang Mo Kio and Clementi both secured million-dollar HDB transactions this year, the towns provided “the most worrying picture” of the HDB resale price situation.

Earlier in November, a five-room unit at Teck Ghee Vista in Ang Mo Kio Avenue 1 was sold at a whopping price of S$1,008,888, making the second unit in Ang Mo Kio to have crossed the S$1 million mark.

It was found that between 2013 to end of November this year, the resale prices for four-room flat prices in Teck Ghee Vista have increased from S$618,500 to S$631,768, rising by 2.2 per cent.

Contrary to the resale prices of older HDB flats in Ang Mo Kio –- including the flats near Ang Mo Kio MRT, flats near upcoming Mayflower MRT, and flats along Ang Mo Kio Avenue 10 –- which have seen a decline in the span of 2013 to November this year.

For example, the old flats near Ang Mo Kio MRT –- which was built in the late 1970s with 55 to 56 years of a remaining lease –- have declined by 19.6 per cent. The price went down from S$551,174 to S$443,327.

99.co’s report highlighted that the overall HDB Resale Price Index declined by about 10 per cent during this time, indicating that any decline in HDB resale prices may be “cushioned by the robust prices for newer resale flats”.

It added that the average transaction prices of older four-room flats in Singapore plummeted by 1.46 per cent, despite when the RPI recorded a 1.5 per cent in resale prices in the third quarter of this year.

“It’s also highly revealing that, despite there being about three times more number of flats built before 1990 than flats built on or after 2000, resale volume for the latter continues to outspace the former, indicating that Singaporeans much prefer newer flats to older ones,” said the property portal.

This preference and the resulting differences in demand could further exert downward pressure on prices of older flats, it added.

Furthermore, the chart provided by 99.co shown that the resale transaction prices for the newer flats in Ang Mo Kio seems to distort the average transaction prices.

As for HDB flats in Clementi, the average transaction prices for four-room flats at Casa Clementi increased 5.1 per cent from 2018 to November this year, while prices for the old HDB flats near Clementi MRT declined by 3.8 per cent in the same period.

99.co stated that the old HDB flats along Sungei Ulu Pandan declined 8.5 per cent in the span of 23 months.

Additionally, prices for old HDB flats in the West Coast Area of Clementi fell by about 6.75 per cent.

99.co highlighted that the average resale prices in Clementi “became distorted” in 2018 in which older resale flat price continued falling.

It added that the HDB launched more than 1,600 new Build-to-Order (BTO) flats in Clementi in 2017, the same year as to when the old flats near Clementi MRT declined by 9.2 per cent.

Meanwhile, taller HDB flats could also be “amplifying the distortion of prices” in the resale market overall, given that most of the older flats are only 10 to 15 storeys in height.

99.co found that none of the transactions in projects that have had multiple million-dollar transactions was for flats below the 25th storey.

The Peak at Toa Payoh, in particular, has seen four seven-figure transactions this year but the median floor level for these transactions is 38th storeys, it added.

Based on 99.co’s chart below –- which singled out four-room units in Ang Mo Kio’s 30-storey Teck Ghee Vista for comparison –- the prices of units on higher floors increased, while the lower floor units declined.

That said, the increasing number of transactions of super high-floor units in the resale market is also a likely factor in the distortion of HDB resale price trends.

In its analysis, 99.co opined that while the RPI is “arguably still a reliable gauge” of the price trend for resale flats overall, the apparent “lack of explanation in its methodology means that Singaporeans cannot simply take it at face value”.

“The index certainly can’t show us what our data has done, which is to prove that overall price trends may be distorted by newer flats with longer remaining leases, as well as floor level premiums from the sale of newer HDB flats that rise to more than twice the storey height of old flats,” said 99.co.

“And as the HDB resale market racks up these million-dollar deals, our ministers are once again beginning to focus talk on the ‘lottery effect’ of these newer flats. Perhaps casting the spotlight on the lottery effect, and in the process coming up with enough reasons to curb it, is a way of papering over the growing price divide of newer versus older HDB flats,” 99.co added.

While such a view may appear “cynical”, 99.co said that it is a “justified” one.

“The question we need to ask, as more and more estates are seeing million-dollar flats, should be: “Are new BTO flats having the unintended effect of accelerating the decline of resale value of older flats?”

This is, then, where “independent insights into the HDB resale market” ought to come into play to help “identify trends that official indices may hide or gloss over to the potential detriment of Singaporeans,” according to 99.co.

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