Understanding Singapore HDB Resale Market: The Framework

Introduction

The Housing and Development Board (HDB) resale market is a dynamic and multifaceted entity that plays a central role in Singapore’s real estate landscape. With over 80% of the population residing in HDB flats, this market is a crucial component of the nation’s housing ecosystem. In this framework overview, we will delve into the intricacies of the HDB resale market, exploring its dynamics, key factors, and the reasons behind its enduring popularity.

For first time resale buyers, this will give you a good basic overview before you purchase your first resale HDB.

History and Purpose of HDB Resale Market

To truly understand the HDB resale market, we must first grasp the history and purpose of the Housing and Development Board in Singapore. Established in 1960, the HDB’s primary objective was to provide affordable housing for the rapidly growing population. Over the years, HDB flats have become an integral part of the housing landscape, offering affordable and quality housing to the majority of the population.

The HDB resale market, created as part of the broader HDB housing scheme, allows flat owners to sell their HDB flats to other eligible buyers in the open market. This system offers flexibility to HDB flat owners who may need to move to a different location or upgrade to a larger flat as their family grows.

HDB Resale Market Overview

The HDB resale market provides a diverse array of housing options for potential buyers. Unlike new flats, which are sold directly by HDB and come with a waiting period, resale flats are units sold by current owners and are available for immediate occupation. In the HDB resale market, buyers and sellers have the freedom to negotiate with each other before deciding on the final selling price. An important term in these transactions is Cash Over Valuation (COV), which is the extra money that buyers have to pay in addition to the valuation of the property.

Factors Influencing the HDB Resale Market

1. Government Policies: Government policies play a significant role in shaping the HDB resale market. Policies related to housing loans, grants, and eligibility conditions can directly impact the demand and supply of resale flats.

2. Economic Conditions: The state of the economy can also influence the HDB resale market. During periods of economic growth, the demand for resale flats may increase as people have more disposable income. Conversely, in times of economic downturn, demand may decrease.

3. Buyer Sentiment: Buyer sentiment, influenced by factors such as changes in interest rates, perceived future property prices, and the general economic outlook, plays a crucial role in the HDB resale market.

Understanding HDB Resale Prices

Resale prices of HDB flats can vary significantly depending on factors such as location, flat type, floor level, and the age of the flat. For example, flats in estates or those near amenities like MRT stations and schools often command higher prices. HDB provides quarterly updates on the median resale prices by town and flat type, which can be a useful resource for understanding price trends. For instance, the median resale prices for registered resale applications in the 3rd Quarter of 2023 ranged from $327,500 for a 2-room flat in Bukit Batok to $929,000 for a 5-room flat in Bishan.

Predicting HDB Resale Prices

Predicting HDB resale prices can be challenging due to the multitude of influencing factors. However, certain methods can provide a rough estimate. One method is to compare the price of the resale flat with the launch price of Build-To-Order (BTO) flats in the same area. Typically, there is a 20% to 30% difference in the price of BTO and HDB flats. Another method is to use data from past HDB resale transactions, which is publicly available. This data includes the pricing of HDB resale flats traded since the 1990s up to the most recent month.

Eligible Buyer Categories

1. Singapore Citizens: Singaporean citizens are eligible to purchase HDB resale flats without any restrictions, assuming they meet the eligibility criteria.

2. Permanent Residents (PRs): PRs are eligible to purchase resale HDB flats but face some restrictions. PRs are only allowed to purchase resale flats if both husband and wife PR status is 3 years and above and are not eligible for subsidies.

3. Non-Citizens: Non-citizens are not eligible to buy HDB resale flats unless they are married to a Singaporean citizen or are a part of a specific scheme.

Financing and Housing Loans

Financing a resale HDB flat purchase involves various options, including CPF savings and housing loans from financial institutions. Central Provident Fund (CPF) savings can be used to pay for the flat’s purchase, significantly reducing the out-of-pocket expenses for buyers. Housing loans are available from banks and HDB Loan facilities, with varying terms and interest rates. Buyers must carefully consider their financing options and ensure they are within their means.

Resale Levy

One important consideration for HDB flat owners looking to upgrade to a larger flat is the resale levy. The resale levy is a form of compensation to the HDB for subsidizing the purchase of the first HDB flat. It is imposed on flat owners who sell their existing HDB flat and purchase another subsidized HDB flat (BTO). The amount of the resale levy depends on the flat type of the last subsidize flat purchased. The key is this, as long as you are getting a 2nd subsidize flat from HDB, resale levy will kick in.

Ethnic Integration Policy (EIP)

The Ethnic Integration Policy (EIP) was implemented in 1989 to ensure a balanced ethnic mix across all HDB estates to prevent the formation of racial enclaves. Objective to promote racial integration and harmony, it ensures there is a balanced mix of various ethnic communities in every HDB towns to Live, Work and Play together. The EIP limits are set at block and neighbourhood levels through regulating the sales and purchase of HDB flats in every block and neighborhood.  This policy is an important aspect in helping Singapore maintain a diverse and inclusive community.

The Role of Property Agents

Property agents play a significant role in the HDB resale market. They help both buyers and sellers navigate the complex process of selling or purchasing a resale flat. Property agents provide valuable expertise in pricing, paperwork, and negotiation, making the transaction smoother for all parties involved. You can contact me anytime at 8811 4441 to see how I can help you in your property aspiration.

Sustainability and Future Challenges

The HDB resale market faces challenges related to sustainability, including the diminishing lease period of older flats. As the lease of a flat nears its expiration, its value decreases significantly, posing challenges for both sellers and buyers. The government has introduced various policies to address this issue and enhance the long-term sustainability of HDB flats.

Conclusion

The HDB resale market is a fundamental aspect of Singapore’s housing landscape, offering diverse housing options for its citizens and PRs. Understanding the intricacies of the market, including eligibility, pricing dynamics, financing options, and government policies, is crucial for anyone considering buying or selling a resale HDB flat. As the government continues to implement measures to ensure the sustainability of HDB flats, the market will continue to evolve, maintaining its relevance and enduring popularity in Singapore’s housing sector.

The above is just the very basic fundamentals of HDB resale market. Within every aspect discussed there are more rules and regulations which are not discuss here. If you are interested to find out more, do contact me and I will do my best to answer you. Like I always believe, it’s never wrong to be clear before making a decision.