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SINGAPORE – The Housing Board’s resale market posted a surprising rebound in the third quarter of 2020, with transactions spiked to a 10-year high after falling to its lowest level since 2007 in the previous three months.
7,787 resale apartments were traded in the July-September quarter, an increase of 127.3 percent from 3,426 units in the second quarter, when sales fell 40 percent quarter-over-quarter due to the two-month circuit breaker, which ended on June 1.
But this wasn’t all pent-up demand – the number is also 24.3 percent higher than the 6,264 apartments sold in the same period last year.
Resale volume of 7,787 apartments is also the highest in 10 years, as 8,205 apartments were sold in the third quarter of 2010, analysts said.
Buyers flocked to the HDB resale market as it favored living space and affordability in the current economic climate, said Huttons Asia research director Lee Sze Teck.
Orange Tee & Tie director of research and consulting Christine Sun said some of the demand could have come from the Build-To-Order (BTO) market.
“Many recently launched BTO flats were scheduled to be completed in four to five years and the long waiting period brought some buyers to the resale market, especially for couples with urgent housing needs,” he said.
Ms. Sun added that many BTO releases were heavily underwritten and unsuccessful candidates had to turn to the resale market as an alternative.
HDB said that around 9,300 BTO flats will be offered at various properties next month and in February of next year. The next Balance Flats Sale exercise will also take place next month, barring unforeseen circumstances.
Prices for HDB resale floors also rose, 1.5 percent stronger quarter-over-quarter, after rising 0.3 percent in the second quarter. This is the fastest growth rate in the past eight years, having increased by 2.5 percent in the fourth quarter of 2012, said ERA Realty head of research and consulting Nicholas Mak.
Year-over-year, prices were up 2.3 percent. They are up 1.8 percent during the first nine months of this year.
“This can be seen as a milestone on the road to recovery for HDB’s resale segment, where prices have been relatively low since the implementation of the 30 percent mortgage servicing ratio in 2013,” PropNex said.
He added: “In all likelihood, HDB resale values in 2020 will exceed the 0.1% increase recorded in 2019. We project that resale prices will increase by 2.5% to 3% in 2020, possibly marking the faster pace of price increase since the 6.5% growth in 2012. “
Ms. Sun said the price increase could be attributed to the sale of many new HDB resale apartments in the third quarter.
“As newer floors tend to be priced higher than older ones, the overall price index could have been ‘high’ for newer floors. Some sellers have also increased their sales price since demand for homes has returned, “he said.
Lee said the supply of resale flats in the third quarter was lower as some improvers held back from selling their flats due to the six-month extension in the remission of additional buyer’s stamp duty (ABSD). So there were slightly more buyers than sellers of resale flooring in the third quarter, resulting in higher prices, he added.
HDB resale prices may continue to climb in the coming quarters due to lower supply due to the longer completion period of BTO floors and ABSD relief. Lee said resale prices may rise as much as 2.5% this year, the biggest price growth since 2012.
Ms Sun said the real estate market is still at risk from a confluence of economic challenges: a global economic slowdown, a bleak employment outlook and the adverse impact of the withdrawal of government support measures for businesses.
However, the tailwinds of low interest rates may prop up sales and sustain prices in the short term, he added.
Ms Sun said: “We are cautiously optimistic that 20,000-23,000 resale flats could be traded this year. Prices may range from 1.5% to 3.5% for all of 2020.”
Mak said that at the current rate, the price index could rise between 2.5% and 3.5% by 2020. Also, between 23,000 and 24,000 HDB resale floors could be traded in 2020, roughly the same volume as the 23,714 floors traded in 2019.
For HDB’s rental market, the loss of jobs may have led to lower rental volume. There were 8,196 applications approved to rent HDB flats in the third quarter, a 22.2 percent drop from 10,539 the previous quarter and a 31.7 percent drop from the same period last year.
Ms Sun said rental demand was strongest in the third quarter because employers were actively relocating their workers from dormitories to prevent them from becoming infected with the coronavirus and avoid the hassle of observing strict regulations there.
HDB rents rose an average 2.7 percent during the third quarter, Huttons Asia estimated. Woodlands saw the largest increase in rents as more Malaysians rent flats in the area due to its proximity to Johor.
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