It is a headline solely property sellers like to see: “HDB resale costs rise for twenty second straight month”.
The sellers market continues to endure in opposition to all odds, at the same time as GDP development continues to shrink this 12 months primarily based on preliminary information — we’ll know for certain when MAS updates us subsequent week on the twenty fifth with the ultimate information.
However can we anticipate HDB resale costs to drop in 2022? A method we are able to make an informed guess is by trying on the HDB Resale Worth Index.
What’s the HDB Resale Worth Index?
The HDB Resale Worth Index is an indicator of total worth motion of public housing. It’s calculated utilizing resale transactions registered every quarter throughout cities and flat sorts.
The present base interval is the first quarter of 2009 — which implies 1Q2009 has an RPI of 100. The HDB Resale Worth Index for the first quarter of 2022 is 159.5. Meaning prior to now 4 months, costs of HDB resale flats are nearly 60 per cent greater than what they had been in 2009!
That is the best worth index we have ever seen, beating the earlier information set final 12 months. Previous to 2021, the best HDB RPI was 149.4 in 2Q2013.
We are able to additionally see that the final time the Resale Worth Index rose at this fee, it was over a interval of eight years between 2005 and 2013. Again then, the federal government had tried to introduce numerous cooling measures from 2010 onwards, nevertheless it was solely upon introducing MSR and TDSR in 2013 that lastly triggered the HDB Resale Worth Index to drop that 12 months.
2021’s cooling measures look like barely efficient
The cooling measures that got here into impact on the finish of 2021, seem to have slowed down the tempo of resale costs.
The Resale Worth Index of 159.5 represents a 2.4 per cent improve quarter-on-quarter, which is decrease than the earlier improve of three.4 per cent.
The cooling measures have been way more efficient in slowing down the expansion in personal property costs, as evidenced by the Residential Property Worth Index.
It is because the principle group of patrons affected by final 12 months’s cooling measures are these seeking to purchase funding property, with the will increase in ABSD. Traditionally, ABSD by itself will not be a really efficient methodology of cooling HDB resale costs.
Why are HDB resale costs so resilient?
Even within the worst financial scenario, HDB flats are typically the least affected. With most items being owner-occupied, versus being funding properties, most sellers will both hold their items or downgrade to a different HDB flat.
In actual fact, in a recession, demand for HDB flats could develop as householders seeking to promote their condos will possible purchase an HDB flat from the ever-present resale market.
What does this imply for HDB resale costs in 2022
All this appears to recommend that, barring additional cooling measures, we are able to anticipate HDB resale costs to proceed to develop this 12 months.
That stated, there may be one issue which may make a distinction and gradual resale costs.
We predict a file variety of contemporary resale flats to enter the market this 12 months, with over 31,000 items hitting their 5-year Minimal Occupation Interval or MOP. In actual fact, earlier this 12 months we highlighted seven BTO initiatives that may MOP this 12 months.
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Nonetheless, this can most likely be solely a short lived salve, because the decrease variety of flats reaching MOP in 2023 and 2024 will ultimately trigger costs to skyrocket as soon as once more.
This text was first revealed in Mortgage Grasp.