Here’s what I think of the Singapore property market in 2016 (and beyond). I’ve just sold my HDB and am renting temporarily waiting on the side to jump in. If you’d like me to summarise in one sentence, I think the market has not softened enough. At the moment only the super luxury properties in Core Central Region (CCR) ~$5m and above are feeling the pinch. There are also some condominiums in Rest of Central Region (RCR) with prices above $2m that are feeling some pressure because at $2m the buyer pool starts shrinking. However, anything below $2m is still quite resilient because many owners are still holding on to their prices with hope that the cooling measures may be relaxed soon.
Let’s start with HDBs
HDBs prices in general have tanked quite a bit due to the flood of BTO in the last few years. However, BTO represents only a fraction of the overall Singapore property buyer population as BTO/DBSS flats are only eligible for [married|single>35yr] Singaporeans. There is still demand from PRs and foreigners going to resale HDB and condos.
By H2 2016, many BTO/DBSS flats especially those in Choa Chu Kang, Punggol, Sengkang would have obtained their temporary occupation permit (TOP) and would be ready for occupation. Once these BTO flats are ready, there will be landlords losing their tenant(s) and parents potentially downsizing after their kids have moved out. This will lead to another depression in property prices. There are many more HDB flats TOP-ing in 2017 in more areas like Woodlands, Yishun and Sembawang and the numbers are scary; I’ll leave you to do your own research here.
PRs can only buy resale
As of now (2016) the HDB resale market is still being kept afloat by PRs. There’s also decent foreigner rental demand for cheaper HDB flats/rooms, but that said, the price gap between a HDB and Condo room rentals have narrowed as Condo landlords are facing the pressure and lowered their expectations.
2021 and beyond will be the bloodbath years
Here’s the interesting part: I think that in 2021 (5 years from now) when all the newly built flat owners fulfil their HDB minimum occupation period (MOP), there will be a flood of resale properties in the market. The competition for resale HDB will be interesting to watch. My personal opinion is that you should consider selling your properties now if you live in any of the towns that have more than 2,000 units TOP from 2016 and beyond.
Condominiums below $2m still hot
Condos are still a lifestyle dream for most Singaporeans. Most people I know sold their HDBs to upgrade to a Condo, otherwise they would simply stay put for good. There’s still decent demand for Condos right now, especially in the Outside Central Region (OCR) where decent sized 99-year leasehold condos can be had by young families for ~$1m or less to enjoy the facilities and prestige.
The amount of investing and rental activities have dropped quite drastically, however, partially caused by weak market affecting (foreign) employees and investors.
Like I mentioned earlier, condos above $2m are feeling more pressure because at that quantum, the number of real buyers, i.e. people buying for own stay, are significantly lesser as such amounts can fetch a decent landed property (more on that later). Rental yields also start to diminish at above $2m.
Seller stamp duty is a deterrent and is keeping resale condo prices high
There are also many condos TOP-ing this year and the next few years. This will cause a dip in condo rental prices within the next few years, but my gut feel is that condo resale prices will stay for now because the seller stamp duty (SSD) is a deterrent; if sellers want to make a profit, the SSD would be factored into the sale price causing resale condo prices of newly TOPed projects to actually increase. This is the primary reason why I said in the opening paragraph that the market has not softened enough — we need to ride out the SSD period.
Location, location, location
Another general observation is that there’s also less price gap between 99, 999 and freehold condos as most investors look at rental yield as a baseline for their return on investment. As with all properties, location is the key to price.
For condos, expect to see drop starting in 2018 and hitting hard in 2021
Similar to HDBs, I think 2021 will be a big bloodbath. Why? Seller stamp duty (SSD) takes 3 years to taper off, so many newer projects that TOPed within these few years would have been free of SSD by ~2018 and the would be a flood of condos on resale. Then, as HDB MOPs are fulfilled in 2021, thousands of properties would be up for resale or rental. The HDB sales and rental competes directly with condos for the PR/foreign buyers/tenants.
So the big question is, can you wait?
If are intending to upgrade to a condo and bought your HDB in 2009/2010 and recently just fulfilled your MOP, you can probably still sell your HDB now for a decent profit (20-30%) from 2009/2010 prices. Assuming you bought your property for $300K, that would be close to $90K in profits. Rental market is soft now, so assuming you rented a decent HDB for around $1,800 per month, the profits can hold you through ~50 months which is more than sufficient for you to ride the tides to a lower point before buying again.
Don’t forget also: meanwhile your CPF account is not paying mortgage, so all the money (and profits) that went back in your CPF is collecting a handsome 2.5% interest for your next property purchase instead of getting stuck in the current rising interest rate environment. You could easily save yourself several hundreds of thousands in dollars from current condo prices.
What about landed properties?
In general, freehold landed properties will still hold good value as the number of land plots are truly limited. It has not much direct competition from HDB or Condos as people buying landed are seeking different lifestyles and priorities. Landed properties generally do not generate good rental yield. Also note that only Singaporeans can buy landed; PRs can apply with Singapore Land Authority (SLA) but I heard that it can be difficult to obtain approval. The downside to landed property is low liquidity as the buyer pool is smaller. If you decide to plonk all your life savings into a landed property, be sure you can afford to hold it.
99 year landed properties will generally remain stagnant unless the location is good, simply because it does not provide better rental yield than condos in general. It is OK to buy for own stay and house multiple generations under one roof, but I personally would avoid it as an investment vehicle.