HDB Resale Prices Down 9.8%, Nearly Double MND's Target for Cooling Measures

HDB resale prices down in November. HDB resale prices dropped by 0.8% in November compared to October 2014. HDB 3, 4, 5 - Room and Executive flats resale prices all slipped by 0.8%, 1.2%, 0.2% and 2.2%, respectively.

According to the SRX HDB Price Index:

HDB Resale prices in November 2014 hit a 40-month low since Aug 2011;
Year-on-year, prices have dropped 6.3% from November 2013;
Prices have declined 9.8% since the peak in April 2013;

Notes regarding price decline:

(a). In May 2013, one month before the government introduced TDSR, National Development

Minister Khaw Boon Wan, speaking in Mandarin, told participants at an Our Singapore Conversation dialogue on housing, “If housing prices keep rising, it won’t be good. If we can maintain them or even lower them by a few percent, for example 5%, that’s good. When I came into MND…that was my target.”(b). "HDB prices have declined more than that of private resale flats because the government has been able to fundamentally change both supply and demand in the HDB market whereas it has only changed demand on the private resale side," said Jeremy Lee, chief technology officer for SRX Property.

(c). From this year to 2016, MND expects 6,000 HDB upgraders to take the keys to their BTO flats each year. This number is twice that of last year. The upgraders must sell their existing HDB flats within six months of getting their BTO keys. The net result is that there is more supply in the HDB resale market.

More supply puts downward pressure on prices.

There is a second way BTOs impact prices of HDBs. The government decoupled BTO pricing from the resale market resulting in lower BTO prices.

As such, the BTO policy accomplishes two things. It introduces more units at below market price. This causes the price decline in the HDB resale market to outpace that of the private resale market.

Resale volume slipped. According to HDB resale data compiled by SRX Property, 1,350 HDB resale flats were sold in November, a 13.1% decrease from 1,553 transacted units in October.

Year-on-year, resale volume increased by 11.4% compared with 1,212 units resold in November 2013;
Resale volume is down 63.0% compared to its peak of 3,649 units in May 2010.

Overall median Transaction Over X-Value (T-O-X) negative again. According to SRX Property, HDB prices continue to face downward pressure and negative market sentiment in November 2014. The median T-O-X for HDB measures whether people are overpaying or underpaying the SRX Property X-Value estimated market value.

Overall Median T-O-X was NEGATIVE $3,000 in November 2014;
Median T-O-X for HDB 3 room, 5 room and Executive flats were all negative in the range of negative $1,000 to negative $5,000.

Geylang posted the highest median T-O-X. For HDB towns having more than 10 resale transactions with T-O-X in November 2014, Geylang reported the highest median TOX of $8,000, followed by $7,500 in Queenstown and $3,500 in Toa Payoh, respectively.

This means that majority of the buyers in these towns has purchased units above the computer-generated market value.

Among relatively active towns, Bukit Panjang, Pasir Ris and Yishun posts the most Negative median T-O-X. Among HDB towns having more than 10 resale transactions with T-O-X in November 2014, the lowest median T-O-X were in Bukit Panjang, Pasir Ris and Yishun, at NEGATIVE $ 10,000, NEGATIVE $6,500, and NEGATIVE $6,500, respectively.

This means that majority of the buyers in these towns has purchased units below the computer generated market value.