Are Million Dollar Singapore Property HDB Flats Going To Be The Norm?
It was reported in the media in early October that a 1,668 square foot HUDC unit at Block 315 in Bishan along Shunfu Road was sold for $1.1 million, or around $659 per square foot. It was also let slip that the flat was priced at $900,000, so that the buyer paid a Cash Over Valuation (COV) of $200,000, and he did so because the unit was on a high floor and located expediently just outside the edge of the city. There had been also chatter about the en bloc potential of the estate, like Amberville, to give an explanation for the unusually high price paid.
I took a glance at the HDB website and it appears there's another unit of precisely the same size but a lower floor in Block 319 which has also sold for $1.1 million lately. Whatever the reasons the buyers paid such a heavy price for it, for most Singaporeans the thought on their minds might be: “Are million buck HDB lofts going to be the standard in the future?”
These million buck units are not your classic HDB lofts. Firstly these are HUDC terraces, that were built under an already curtailed special scheme the Administration confirmed in the 1970s to satisfy the “sandwich class” who could not afford non-public properties but aimed to bigger homes and better estates “some were even gated to give residents more exclusivity. From 1995 these estates may be privatized, thus giving rise to the talk of enbloc potential.
Secondly, at about 1,700 square feet, these units are very large. So the relatively high per square foot price of $659 is made worse by the big flat size to give you a high absolute cost of $1.1 million. New HDB apartments being built now mostly only go the size of 1,200 to 1,400 sq. feet, so these older but bigger HUDC and Executive residences also benefit from the scarcity factor.
Thirdly, these particular units are found in a prime location in Bishan near the Circle Line MRT. Bishan is a hot area with high HDB prices, and in the months of Sep and October the costs of resale transactions for Executive residences ranged between $648,000 to $860,000. Contrast this with a less well-liked area for Woodlands where the same type of flats in the same period transacted in the range of $430,000 to $616,000.
So no, I do not think million buck HDB terraces are going to be normal unless per square foot prices in the “hot” HDB estates begin to approach the $700 to $800 per square foot levels, that when we're going to launch to see a lot more of these transactions. For the moment, these two transactions are one offs (although similar units in those estates could also transact above 1,000,000 dollars).
Housing price hysteria
But whether we see a lot more of these million buck HDB transactions or not, these stories are playing to an anxiety amongst many Singaporeans that housing costs are rising too swiftly and moving out of their grasp. Indeed, from quarter 1 of 2007 to the third quarter (flash guess) of 2010, the HDB resale price index has risen by 60%, a pace which many consider too fast.
In response, on August 30 the government announced a set of measures to drive out backers from the HDB resale market and stabilise costs. And on October 18, HDB claimed further tweaks to the resale process for HDB lofts, including enhancing the Resale Check list for sellers and introducing a 7-day cooling-off period between the submission of the Resale Checklist and granting of the Option To Purchase.
Whether these will work to contain the fast price raises are yet to be seen, but in the shorter term we expect exchange volumes to decline, with many consumers taking a “wait and see” disposition.
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