In recent years, the increase in resale prices of HDB flats in Singapore has not matched the surge in private residential prices, leaving some HDB upgraders unable to make the transition. According to data, the proportion of HDB upgraders among private homebuyers has declined to below 40% since the third quarter of 2020, while the proportion of buyers with the original address being private residences has risen to 60%. This trend is particularly evident among buyers in new projects outside the Core Central Region (OCR).
Desmond Lee, Senior Director of Data Analytics at Huttons Group, highlighted that the significant surge in private residential prices has likely constrained the purchasing ability of HDB upgraders. From the first quarter of 2009 to the third quarter of 2023, private residential prices increased by 136.5%, whereas HDB prices saw an increase of only 78.4%. This gap is expected to widen further in the future as the HDB market faces more restrictions.
Pauline Siew, Head of Research and Content at PropNex, stated that the demand in the private residential market continues to be driven by existing private residential occupants because the rising prices have made it challenging for some HDB upgraders to enter the private residential market. According to PropNex's survey, those with a home-buying budget of SGD 1.5 million or less are mostly existing HDB residents, while those with a budget of SGD 2 million or more are mostly private residential occupants.
However, analysts believe that the introduction of more quality HDB flats and Executive Condominiums (ECs) in the future will not pose a threat to the mass-market private residential market. Christine Sun, Vice President of Research and Consultancy at OrangeTee & Tie, pointed out that with more new HDB flats being launched, the primary market will attract more first-time homebuyers, while the HDB resale market will face more intense competition. Consequently, resale prices in the HDB market are not expected to grow significantly, and the number of HDB upgraders purchasing private residences is likely to decrease in the future.
The government recently announced the implementation of a new HDB flat categorization framework from the second half of 2024, classifying Built-to-Order (BTO) flats into Standard, Optional, and Prime locations. The Bayshore district is expected to launch the first batch of 7,000 HDB units in 2024, constituting 70% of the overall residential launches, with the remainder being private homes. Pauline Siew believes that the HDB flats in Bayshore and future waterfront areas in the southern region will be popular due to factors such as their prime location, well-designed surroundings, green spaces, and sustainability initiatives. However, the prices of HDB flats in these areas exceed the income limits of some families, compelling them to turn to the resale HDB and private residential markets.
Cheng Tsung Fung, Associate Professor and Head of the Department of Real Estate at the National University of Singapore Business School, suggests that the high prices of private residences may drive some potential buyers towards the HDB market. However, the impact on the private residential market will depend on HDB supply and the trend in private residential prices. He notes that ECs are the closest alternative housing category to mass-market private residences, and sandwiched families with a monthly income of less than SGD 16,000 are more likely to afford ECs. With more ECs in the pipeline in the coming years, the mass-market private residential market may face greater pressure, possibly leading to price caps and adjustments.