Key factors likely to impact HDB price trends in the near term
The talk of the town has been that HDB owners should cash out their flats quickly as many who have been sitting on negative sales or little profits are finally out of the woods as HDB prices crept up in the last few quarters.
Is it true then that this window of opportunity is closing or is it mere hype?
Let's examine the key factors affecting HDB price trends today and whether it is wiser for a HDB flat owner to upgrade now or later.
HDB Price Trends Overview
Resale HDBs have seen a very good run since Q2 2020.
After 8 years, the HDB Price Index has finally inched past the last historical high of 149.40 set in 2013 before the implementation of mortgage servicing ratio (MSR).
The growth can be largely attributed to 2 factors - The Enhanced Housing Grants announced in Sep 2019 (pre-COVID) and the need for immediate housing options over the last 2 years of construction delays.
Enhanced CPF Housing Grants
The Enhanced CPF Housing Grant released in Sep 2019 was a booster shot to the HDB market after 8 years of being in the doldrums.
This policy decision helped redistribute wealth among the masses and put more money into the pockets of HDB buyers and sellers.
As HDB prices have barely crossed the last all time high, it is unlikely that the government will cool the HDB market in the near term.
Upcoming HDB MOP & Completed Private Home Supply
Although 2022 is slated to be another year of record high HDB flats achieving MOP status (eligibility to sell), the following 2 years of 2023 and 2024 will see a significant drop in supply and this should continue to prop up resale flat prices.
Prime Location Housing (PLH)
The introduction of the Prime Location Housing (PLH) model will drive some segments of the population to favour resale properties within the central region as stringent policies deter them from opting for brand new flats.
This is likely to spur demand for both resale flats & private homes further.
Improvement In Construction Pace Likely In 2022
The improvement in construction pace in 2022 may improve the turn around time for BTO flats and hence see improved demand.
This factor if coupled with a drastic increase in BTO launches may significantly affect demand for resale flats and is the only likely factor to cause downward pressure on the resale flat market in the near term.
However, it is not a likely scenario.
With more potential upside than downside for the HDB market, is it wise to sell and upgrade now or hold on further?
From the above, we can witness how much an average HDB flat and an average condominium has appreciated in the recent 2 quarters of 2021.
Given tight labour conditions, construction delays, low interest rates and the forecasted recovery of the economy, further growth can be expected for both private and HDB markets in 2022.
Summary
It is crucial to understand for every dollar increment in the HDB market, the private market is likely to see double the increment as the denominator for a private home is much higher.
If you intend to upgrade, it is thus wiser to take action sooner rather than later as your nett gain will be higher when buying a private property today.
However, if you are a retiree who is intending to right-size to a smaller HDB flat, you can afford to wait for prices to climb further before downgrading as your nett gain will be higher by waiting out.
For more precise and in-depth discussion, reach out to me for a Property Wealth Planning consultation.
