The government’s policy updates on Central Provident Fund (CPF) usage and Housing and Development Board (HDB) housing loans may have given the HDB resale market a new lease of life.
This comes as demand for older HDB flats surged in the second quarter of 2019, with the number of resale transactions for flats that were 40 years old and above jumping 40 percent to 564 units in May-June 2019, from 403 units over the same period last year, reported The Business Times citing an OrangeTee & Tie report.
Resale transactions for flats between 30 and 40 years old also climbed 10.4 percent to 1,219 units.
In May, the government unveiled the updated rules on CPF usage and HDB housing loans, which provided greater flexibility to homebuyers to use their CPF to purchase property and obtain bigger housing loans provided the property’s remaining lease could cover the buyer until the age of 95.
Total HDB resale transactions rose 29.8 percent quarter-on-quarter to 6,276 units in Q2 2019 – its first increase since Q3 2018. For the first half of this year, HDB resale transactions grew 6.8 percent year-on-year to 11,111 units.
While sales activity in the second quarter is usually in the uptrend, total transactions for Q2 2019 also improved by 5.6 percent from last year.
“This indicates that apart from a seasonal effect, the recent CPF changes may have been a major catalyst that spurred buying demand last quarter,” said OrangeTee.
The policy changes were intended to improve the resale market’s liquidity while making it easier to buy and sell older flats.
“There were many concerns raised about the depreciating value of older flats in the earlier part of last year, and many sellers were struggling to find a buyer,” noted OrangeTee.
“Therefore, the year-on-year increase (in Q2 sales of older flats) is commendable and could signal that the recent policy changes may have started to take effect in helping to spur demand for older flats.”
Sales volume for younger flats below 10 years old also increased substantially during the period. OrangeTee, however, attributed it to the surge in housing supply of flats hitting their five-year minimum occupation period (MOP) and not the policy changes.
In terms of market share, flats aged 30 years old and above accounted for 44.9 percent of total resale transactions in May-June 2019, up from 40.6 percent in May-June 2018.
Flats that are 40 years old and above also saw their market share increase to 14.2 percent from 10.8 percent last year.
Meanwhile, the market share of younger flats that are 10 years old but below 30 years old dropped to 35.8 percent from last year’s 43.4 percent.
The shift in demand for older flats may be due to the policy changes, said OrangeTee.
Moreover, four-room and five-room flats above 30 years old registered a higher increase in sales volume compared to smaller and younger flats.
Resale transactions for four- and five-room flats aged 40 and above grew 53.5 percent and 54.5 percent year-on-year respectively.
Sales for younger flats between 10 and 30 years old, on the other hand, dipped across all flat sizes.
Looking ahead, OrangeTee expects the HDB resale market to continue to benefit from the new rules, with older flats witnessing a revival in demand.
But while sales volumes may continue to increase in the coming months, price recovery may not be as fast, considering the increasing supply of HDB resale flats as well as the influx of flats reaching their MOP this 2019.
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