It’s official: resale HDB flats are back on the menu.
Plagued by construction delays due to the COVID-19 pandemic, as well as private property owners moving out into larger resale HDB flats, demand for resale HDB flats has been on the rise since the circuit breaker period.
The large influx into the HDB resale market has subsequently pushed resale HDB flats upwards; resale flat prices increased for the fourth consecutive quarter in Q1 2021, and are 3% higher compared to the previous quarter. Prices are also 8.1% higher compared to a year ago.
Sales of resale flats also hit a 8-year high in 2020; there were 24,748 resale units transacted, up 4.4% from 23,714 units in 2019.
The pent-up demand for resale flats has also seen cash over valuation (COV) back in the spotlight as more COV transactions have taken place. In fact, some buyers have been paying a COV between $10,000 and $50,000, although it has also been reported that some have paid between $100,000 and $200,000 for choice flats.
Whether you’re a buyer looking to buy a resale flat, or a seller looking to sell, here are five traits that would make a resale flat more attractive (or potentially increase its value):
1. Bigger HDB Resale Flats
Although larger HDB flats have always been popular, the work-from-home culture brought by the COVID-19 pandemic has seen demand for bigger homes, including bigger HDB flats, increase even further as buyers prioritise space and privacy.
In fact, according to this CNA article, the average quarterly increase before the pandemic and from Q3 2020 to Q1 2020 for 4-room and 5-room resale flats was 34%, compared to 18% for 3-room flats in the same period. The average quarterly increase for 5-room flats and executive flats, meanwhile was even higher at 40%.
In general, 4-room and 5-room flats built in the 1990s are the biggest in terms of size, and these flats are attractive to bigger families, so expect it to be of higher value.
2. Rare HDB Flat Types (E.g. Maisonettes, Jumbo Flat, Etc)
Aside from bigger flats, rare HDB flat types that are no longer in production, such as jumbo flats, executive maisonettes, and executive apartments are also popular resale flat types.
Not only are they spacious, but each of these flat types also has its own unique design characteristic.
For instance, executive maisonettes are two-storey HDB flats that are mostly found in mature estates such as Ang Mo Kio, Bishan, and Queenstown.
The first level consists of the living room, kitchen and dining area; whilst the bedrooms are located on the second level, providing its occupants some privacy. Last built in 1995, these flats are about 1,527 to 1,700 sq ft, but some are over 2,300 sq ft—making them ideal for large families.
Another rare and popular HDB flat type is the jumbo HDB flat.
Jumbo flats are a combination of two 3-room flats or 4-room flats. As such, these flats are super spacious; ranging from 1,442 sq ft to over 2,000 sq ft.
It is estimated that there are only 2,900 jumbo flats remaining across estates such as Ang Mo Kio, Bishan, Yishun, and Woodlands.
The rarity of such flats, coupled with their good location, make these rare HDB flat types popular among buyers, and it’s not uncommon for buyers to fork out a premium, even over $1 million.
3. HDB Resale Flats Located in the Central Area
Speaking of good locations, Singaporeans are also generally fond of resale HDB flats located in the central area and/or the city fringe.
Areas like Queenstown, Bukit Merah and Tanjong Pagar are close to the city and tend to have better amenities (e.g. schools, eateries, etc.) and public transport connectivity, which is why most of the million-dollar HDB flats had been transacted here.
In fact, according to this Straits Times article, more than 102 million-dollar HDB flats transactions have happened in the central area since 2012. Popular projects in the area include The Pinnacle @ Duxton, SkyVille @ Dawson, and SkyTerrace @ Dawson.
Based on HDB’s Q1 2021 data, the median resale price of 4-room resale flats in the central area is $910,000, the highest amongst 26 HDB estates. Needless to say, expect to pay a premium if you want to live here.
4. HDB Resale Flats Located in a Transformation District
Given the choice, most Singaporeans would prefer to live in a mature estate because generally, it has better access to amenities like MRT stations, schools, malls, eateries and so on.
However, flats located in mature estates also tend to be slightly more expensive. And despite the current bullish state of the HDB resale market, price affordability remains an important factor for many.
In 2020, seven of the 10 most popular HDB estates with the highest transactions consist of non-mature estates such as Sengkang, Punggol, Yishun and Woodlands. Of the top 10 most transacted HDB estates, six of those were transacted below the national average prices of $452,175.
Some of the key reasons behind the popularity of these estates include future growth and the transformation.
Infrastructure improvements and additions such as office spaces, amenities, residential homes, MRT stations and networks, and business districts will make the area more desirable and help to entice buyers.
For example, despite being considered as a non-mature estate, Woodlands is served by five MRT stations across two different MRT lines. Furthermore, URA’s Master Plan for the area will see the Woodlands Regional Centre becoming the largest regional hub in the north region, which will create more jobs and attract more Singaporeans to live there.
Although flats in Woodlands remain quite affordable, the average price growth of 5-room flats in the past quarter was one of the highest in a non-mature town, rising 16.7% higher compared to before pre-pandemic levels in 2019.
5. Longer Remaining Lease
Resale HDB flats in the market are sold after the 5-year Minimum Occupation Period (MOP) and therefore do not come with a fresh 99-year lease.
Therefore, HDB flats that have recently crossed its MOP are typically more attractive to buyers as there’s still a high number of years left on their 99-year leases. Not only that, but newers flats are potentially better condition with less wear and tear. As such, these flats also tend to fetch higher prices as buyers generally don’t have to worry about outliving the flat’s lease.
Notwithstanding rare HDB flat types or resale flats located in central areas, an ageing flat is likely to depreciate in value because of lease decay. And as the flat ages, the pool of potential buyers becomes smaller.
Unlike new HDB flats, buying a resale flat is more restrictive if you plan on using your CPF funds; if the flat’s remaining lease is not at least 20 years and is not enough to cover the youngest buyer until the age of 95 years, the amount of CPF funds that you can use to service the flat will be prorated.
Not only that, but it will also affect the maximum loan-to-value (LTV) limit you can borrow, which could impact your finances as a lower LTV would mean that you need to fork out more cash for the downpayment.
Other FAQs About What Makes a Resale Flat More Attractive
What Should I Look Out For in a Resale Flat?
The flat’s remaining lease, location, condition of the flat, and size are some of the aspects you should look out for.
Why Are Resale Flats More Expensive Than BTO?
Whilst BTO flats are subsidised by the government, resale flats are sold by independent sellers in the secondary market. Some resale flats are also located close to important amenities, which drive up the prices.
Is It Worth Buying a Resale Flat?
Although older, resale flats are available in every estate in Singapore, and you can buy a resale flat that’s close to the type of amenity that you like, or to your family. In addition, there are fewer restrictions and more government grants available.