7 things to know about the HDB resale spike in Singapore

A city landscape of HDB flats in Singapore

7 things to know about the HDB resale spike in Singapore

While the COVID-19 pandemic has been harsh on our economy, Singapore’s public housing resale market stood tall and flourished as we see higher volumes of HDB resale transactions. Singapore’s HDB resale price rose 5% year-on-year in 2020, and the number of resale transactions also rose by 4.4% year-on-year, increasing to 24,748 flats. 

But what is it about COVID-19 that led to a surge in resale transactions? Here’s what you need to know about the recent surge in resale transactions and how it may impact your home loan mortgage plans.

The numbersWhat the numbers mean for resale HDBs
April year-on-year: Prices of resale flats in April have increased 10.8%.Homeowners might be downgrading from private houses to HDB homes during financial hardship.
August 2020: Five-room flats in Ang Mo Kio’s Kebun Bahru Edge recorded an application rate of 10.3.A total of 2,240 applicants vied for UrbanVille at Woodlands.BTOs are oversubscribed, and homeowners are turning to resale flats to reduce waiting time.
BTO construction delays during Covid-19 mean an additional 1-2 years of construction.The long construction time is turning homeowners who need their homes soon towards resale flats.
Buyers can get up to S$160,000 in housing grants, and CPF can be used for resale homes.The financial strain of purchasing resale homes has been reduced, and more can afford it.

7 things worth noting about the HDB resale spike

1. This isn’t the first time HDB resale transactions have increased during a recession

Singapore has suffered 4 economic recessions over the past 30 years, in 1998, 2001, 2008, and most recently, in 2020. 

Both in 2008 and 2020, the prices of HDB homes appreciated. In 2020, prices rose so much that the hike has bled into 2021. In April 2021 alone, 21 flats transacted for over a million dollars.

There could be many possible reasons for this, especially with HDB homes being a basic necessity. Not to mention, HDB units are also the most affordable form of housing in Singapore. 

This means that private homeowners might be downgrading to HDB options if they were struck by financial hardship during COVID-19.

The prices of condominiums have also increased substantially, with condo resale prices rising for the 8th straight month in April 2021. Prices are expected to raise so much that they’re estimated to hit a 10-year high.

Thinking of getting a condo? Check out the advantages of getting an upcoming EC in Singapore here.

2. BTOs are oversubscribed 

If you’re at the age where many of your friends are getting married and applying for a bank loan or an HDB loan in Singapore, then you’ve probably heard the word “BTO” mentioned so many times that it’s practically a buzzword.

The already dense housing demand isn’t helped with the ongoing pandemic. With the building of new BTO entries slowing down due to limitations, the need for resale flats sees an increase. 

In the months following 2020’s Circuit Breaker alone, sales of HDB resale flats increased by 127.3%. And that doesn’t even begin to explain the competition for balloting in more popular estates. 

In August 2020, five-room flats in Ang Mo Kio’s Kebun Bahru Edge recorded an application rate of 10.3. Similarly, the launch of BTO estate Dakota One was 14.8 times oversubscribed by first-timers and 106 times oversubscribed by second-timers for 4-room flats.

Between the already extensive wait times for BTOs, now exacerbated by the pandemic, many understandably prefer to turn to resale flats in the hope of getting their homes sooner.

3. People rather get a bigger house with their home loan in Singapore

While getting a BTO may be a dream of many young couples, they’re also infamously small. With land constraints becoming an increasingly pressing issue, Singapore homes are consequently reducing in size. 

While most people might not mind the smaller home at first, the lack of space may be detrimental, especially with the pandemic and work-from-home regulations.

Woman working from home due to the COVID-19 pandemic - one of the reasons for a spike in HDB resale flats in Singapore as people yearn for more privacy to concentrate and work from home

As homeowners take to their homes for work and study, the need for an additional room or two has become a greater one. 

Family members or in-laws who were once tolerable during the days of in-office working arrangements might now seem a little too close for comfort. 

It’s no surprise that many might have put their bank loan toward older resale flats for their larger, luxuriant sizing.

Read more about what to look out for when viewing an HDB resale flat here. 

4. Construction delays of BTOs changing plans for those taking home loans in Singapore

Image of am HDB BTO construction site which is affected due to the COVID-19 pandemic, causing an HDB resale spike in Singapore

Due to the rampant spread of covid-19, many construction projects were put on hold — including those of BTOs.

Apart from a shortage of manpower, supply chains across the world were also disrupted. This meant a delay to the already-long wait for the complete construction of BTOs, which typically takes between 2-3 years. 

The bottleneck caused during COVID-19 means that BTOs will take even longer — between 3-5 years to complete construction. 

This could be a significant wait for many, who might much rather turn to ready-to-move-in resale flats.

5. Government grant assistance to ease the financial strain, in addition to getting a home loan in Singapore

The batch of housing grants unveiled in September 2019 is very much still in place, allowing eligible buyers to get up to a sizable S$160,000 in grants for resale flats. 

This is perhaps what has caused the speed of sales in resale flats. The resale volume in March and April 2021 hit 2,448 and 2,340, respectively.

In the past, people were also unable to pay for resale flats using an HDB loan or their CPF account. However, this has since changed, particularly for older apartments that might have a shorter lease remaining on them. 

Buyers can also take an HDB home loan in Singapore without a 60-year-limit plastered upon it.

6. More flats entering the resale market

Flats in Singapore have a 5-year Minimum Occupation Period (MOP) before being rented or sold.  A flurry of flats ended their MOP in recent years, with 27,000 units hitting their MOP in 2019 and 26,000 hitting their MOP in 2020.

As we continue to traverse 2021, 26,000 flats will hit their MOP at the end of this year, and so will another 35,000 in 2022.

That’s not to say that all of these flats are going to go on sale. Some will, causing an increase in resale flats’ prices and the number of resale flats being sold.

So if you’re looking to take out a mortgage loan in Singapore, keep these numbers in mind!

Checking out properties in the resale market? Learn about HDB valuation and how much is the HDB flat worth in this article. 

7. Protective schemes during COVID-19 mean buyers are more confident of servicing their home loan in Singapore

The pandemic’s economic plummet and general trying times may leave many potential home buyers feeling cautious and wary. Still, stimulus packages unveiled by the government to help tide the nation may have helped breathe some confidence into dire times.

Mother and son looking at stimulus packages given to them to help with the home loan in Singapore amid the COVID-19 pandemic

While it may not look like the stimulus packages directly affected people’s ability to tend to their mortgage loan in Singapore, the reality is that the packages helped pad the effects of any income loss during the pandemic. 

Those with the luck of not encountering job loss or major hits to their income may have been better able to afford new resale homes. 

They might therefore have been less fearful of making significant financial commitments.

Toying with the idea of getting a second property in Singapore? Here’s how you can avoid ABSD legally.

Learn more about how rising interest rates affecting the stock market may impact your home buying process in Singapore.

Looking at dipping your toes into the HDB resale market? Make sure to get the right home loan in Singapore.

With hundreds of home loan packages to choose from, you may not even know where to begin looking. 

Over here at FinanceGuru, we’ve got access to all of them from various financial institutions. Our mortgage specialists can help trawl through numerous mortgage loans in Singapore and give you recommendations best suited to your specific needs. 

Home loans don’t have to be difficult, and the prospect of buying an HDB resale home is getting increasingly attractive. If you’d like to be furnished with more information regarding your mortgage loan or Singapore property in general, contact us for a chat. 
Begin your journey with a non-obligatory assessment today, and we’ll give you some of the best recommendations for your home loan in Singapore.

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