HDB Hotspots: A Heated Debate in the Resale Market

When the Population White Paper was released earlier this year, it sparked off a furore which some say exposes the flaws of policy-making in Singapore. The primary point of contention which drew public ire was the idea that the population in Singapore would reach 6.9 million by 2030, a figure most agree would put a tighter squeeze on resources in an already overcrowded city.

Aside from bringing demographic challenges into the spotlight, the White Paper also stoked an underlying concern which resonated amongst Singaporeans: the concept of home on a nationalistic level, and more realistically, the price of purchasing a home in Singapore.

It is without a doubt that the reactions against the prospect of having a massive influx of people coming into Singapore stems from a fear of not being able to afford buying a place to reside in the future, especially so for the case of HDBs, the quintessential symbol of public housing.

This fear is not without its reasoning. Based on the fundamentals of simple economics, the logic would follow that if the price of property is determined by demand and supply, then surely an increase in demand for real estate well beyond supply in the near future would result in the property market being overpriced.

However, will this price growth be significantly higher than what most Singaporeans can fork out? Does this spike in price occur uniformly across all HDB types within each district? And will we see this increase maintaining traction further into 2013 or finally lose steam over time?

To address these questions, we will be analysing how much the prices for resale HDBs have fluctuated over a two year period based on their locality, with volume of transactions in each district being the proxy to determine price. Following which, we delve deeper to examine HDB property types to investigate which units have garnered the highest appreciation.

For the purpose of our comparison, the time frame for analysis will be fixed between Q1 2011 and Q4 2012 and to deliver an accurate representation of HDB properties on the island, we will subcategorize all HDB estates into regions according to their locality (see map below).

As illustrated:

- The blue region represents the North, comprising a mix of old and new, yet popular, HDB districts such as Toa Payoh, Bishan, Ang Mo Kio, Yishun, Sembawang and Woodlands

- The yellow region represents the East, consisting generally older districts such as Bedok, Tampines, Geylang, Kallang/Whampoa, Pasir Ris and Marine Parade

- The red region represents the West, where most educational institutions are situated comprising of Jurong West, Jurong East, Clementi, Queenstown and Bukit Merah

- The green region represents the North-West, made up of Choa Chu Kang, Bukit Panjang and Bukit Batok

- The purple region represents the North-East, containing new estates such as Punggol, Sengkang, Hougang and Serangoon

- The brown region represents the Central region or otherwise known as the Central Business District (CBD) made up of Outram, River Valley, Tanjong Pagar and Rochor HDB estates

Price growth for all, some more than others

Judging from the price trends, all regions experienced similar increase of between 15-18% across the different regions for all HDB property types.

Most notable are the trends in the Eastern, Western and North-East region. What is surprising for the Eastern region is that at the beginning of Q1 2011, the average valuation of properties was one of the lowest at around $418,000, but by the end of 2012 experienced the steepest price gains of an estimated 19% to cost nearly $497,000. What attributed to this price hike is the rise in transactions for resale flats in the Kallang/Whampoa district to bring about the highest price appreciation in the whole of Singapore at 37% between 2011-2012.

Prices in the Western and North-East region followed suit, climbing an average of 15.7% and 18.1% respectively over the same period. Not surprisingly, Serangoon led most of the gains in the North-East region with an average growth of 19%, possibly tied to the full opening of the Circle Line MRT line and other key amenities in the area. As for the West, resale flats had one of the highest average transaction price at an average of over $505,000 by Q4 2012, with Queenstown showing the strongest performance with a 22% growth.

All eyes on the East

Breaking down the regions, we can see similar upward price trends when comparing all HDB property types with 4-room HDBs encountering the highest price rise of over 16%. However, while the North-East region experienced the largest rate of growth of 18.4% at the end of 2012 in this category, the West sails ahead in terms of absolute transaction price at an average of $560,600 as compared to $481,125 in the North-East.

Also, as mentioned previously, the East was the strongest performer overall, especially in the 5-room and executive flats category. Zooming further into the 5-room category in the Eastern region, Bedok comes up tops for rate of price growth at 20%, with an average valuation of $630,000 at the end of 2012. This too is the case for executive flats which can fetch a price of $670,000 in the East.

What does it all mean?

Fortunately, although all regions saw an increase in value across all HDB property types between 2011 and 2012, this trend has slowed down coming into 2013. According to HDB statistics, rate of growth for resale flats fell two straight quarters in Q1 and Q2 2013 to 1.3% and 0.5% respectively, an indication that price increases have managed to be controlled, in part influenced by the introduction of the government cooling measures in Jan 2013. And with added precautionary policies such as the recent MAS rulings and a fresh supply of houses in the pipeline put in place, perhaps there might be a slight chance that price increases will be further controlled as we move into the second half of the year.

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HDB Hotspots: A Heated Debate in the Resale Market

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