Prices of homes are soaring. Is the end upon us?

Why focus on HDB flats, and specifically first-generation resale flats?

80% of Singapore's population resides in HDB flats. While HDB was birthed as a social policy to provide affordable housing to Singapore Citizens/Permanent Residents, opportunistic flat owners have been rapidly selling the Build-to-Order (BTO) flats once the Minimum Occupation Period has been reached for a windfall capital gain. These data visualizations seek to shed light on what the market has been up to recently.

The Minimum Occupation Period (MOP) for HDB flats was introduced to curtail the rapid selling of HDB flats by individuals seeking to make a quick profit. Today, the MOP for resale flats is five years, meaning that flat owners that bought their flats from HDB will have to occupy the flat for five years before it can be sold on the resale market. HDB flats are sold on a 99-year leasehold basis. Using transaction data from Jan 2017 to Dec 2022, we analyze flats with a remaining lease period of 90 years and above. These flats would have recently fulfilled the MOP requirement before the flat can be sold on the resale market and would be the first resale transaction of the flat in the open market (before the next 5-year MOP is reached).

This data visualization is relevant to those considering to purchase first-generation resale flats, which still bear many similarities to BTO flats except that these potential buyers need not wait for the project to be built.

Recent trends in the resale market

Prices aren’t just increasing, but the flat sizes have been decreasing. As a result, the cost of purchasing a square metre of property has been increasing over time across the areas in Singapore. Of interest is Central area and Bishan, where no sale of MOPs have taken place since 2006 as there have been no new BTO projects at those mature estates in the past decade. The scarcity of young flats available on the market in these areas may thus push resale prices up.

Strategies to tide us through

However, in the face of rising prices, buyers are not helpless. Below are some questions we sought to explore to better understand the market for such flats. The prices of flats typically vary because of the following reasons:

What to buy

When to buy

In understanding the market for first-generation resale flats, we are not only concerned about the price but also the quantity of flats transacted. We examine whether month of transaction plays a part. ie whether there is a "hot" month in which buyers and sellers are very eager to exchange hands on the property.

From the graph above, we can tell that while there is no obvious pattern, it appears that H2 of each year is a more popular time for property to exchange hands. Although COVID restrictions in 2020 resulted in only a handful of property being transacted in Apr/May 2020, the number of transactions increased thereafter and remained high, with a monthly count of above 500 consistently. February appears to have the least overall number of transactions, which could be due to the fewer number of days in the month, but also because it coincides with festivities like Chinese New Year, in which people are less likely to exchange hands on a property.

Concluding thoughts

Although first-generation resale flats it does not require balloting or a long waiting time as opposed to BTO flats, there are a number of downsides. The price of such flats are increasing, and this is a trend we observe in most HDB towns. In addition, the large number of flats being transacted at high prices across time suggest that the demand for such flats are very strong. For those that can afford to wait, BTO flats may be a more affordable option given the current resale climate.