What is the HDB Resale Price Index? 2023 guide for homeowners (to-be) in Singapore

Buying property in Singapore is the largest expense anyone would make in their lifetime. Whether it's Build-To-Order (BTO), resale flat, condominium, or landed property, you'll expect to spend at least half a million dollars. It doesn't help that the pandemic sparked a jump in public and private housing prices.

BTO flats faced the domino effect of Covid-induced delays. A usual wait time extends from three to four years to six years. Naturally, it's not practical for young couples to delay their marriage plans to the new timeline. 

Moreover, rental prices maintain record highs, making couples rethink their finances. Thankfully, we are starting to see some promising dips with lower rental volume and transactions from May onwards.

Why bother to pay more for rental when you can just put it in your monthly instalments for your purchase? A resale HDB flat is a viable alternative that comes readily available in your choice estate. Even then, competition is stiff. People are willing to pay through their noses for a unit. In July 2023, a five-room resale flat in Toa Payoh was sold at $1.42 million — the highest for its type. 

For homeowners-to-be, you'll want to keep your eyes on the HDB Resale Price Index (RPI). Through the RPI, you get a pulse on the resale market and movements to make sure you pay a fair price for the resale flat and identify opportunities to secure the best deals.  

What is the HDB resale price index (RPI)? 

The RPI is calculated based on the resale transactions of HDB flats and serves as a benchmark to gauge the general price movements in the HDB resale market in Singapore. For buyers and sellers alike, this tool keeps you informed about the fair value of a resale property based on market transactions for its type and residential area.

The RPI is released every quarter by the Housing Development Board (HDB). Here, you can track the following:

• Median resale prices by town and flat type
• Number of resale applications registered 
• Price increase across the quarters
• Historical data (as far back as 1990)

Also, the transacted prices of individual flats (by block and flat type) can be found via the e-services on HDB InfoWEB.

Factors affecting HDB resale prices

Before we dive into this quarter's RPI, there are several factors you need to know that influence the prices of resale HDB flats, such as location, supply and demand of BTOs, and type of resale units available..

• Geographical Location: the nearer you are to an MRT station and/or shopping mall, the more costly it is to purchase your resale unit
• Size: the larger the unit, the more likely to cost more
• Floor: the higher floor your unit is on, the more likely it is to sell at a higher price 
• Condition: newer resale HDB flats, especially those that pass the Temporary Occupation Permit, will cost more

What was the last report, and what does it mean for Singaporeans?

Fresh off the press, HDB announced their plans for a new flat supply and the flash estimate of 2nd Quarter 2023 RPI. Here’s what you need to know:

• 13,000 BTO flats will be offered in the second half of the year.

Up 31 per cent from the 9,923 units launched in the first half. In August, 6,700 Build-To-Order (BTO) flats will be offered in Choa Chu Kang, Kallang Whampoa, Queenstown, and Tengah. Another 6,300 flats in Bedok, Bishan, Bukit Merah, Bukit Panjang, Jurong West, Queenstown, and Woodlands are to be offered in November.

• On track to launch 100,000 flats from 2021 to 2025

HDB has ramped up the supply of BTO flats by 35 per cent, from 17,100 flats in 2021, to 23,200 flats in 2022, and 23,000 flats in 2023. They will continue to monitor the housing demand closely and maintain a steady pipeline of supply.

• A lower than the average quarterly growth with implemented cooling measures

Q2's RPI is at 176.0, a 1.4 per cent increase from the 1st Quarter's 1.0 per cent growth but still lower than the average quarterly growth of 2.5 per cent in 2022. The resale volume has dropped by 4.6 per cent on a year-on-year comparison — the lowest in the last three years. This has proven helpful with measures such as a wait-out period of 15 months before private property owners are allowed to purchase a non-subsidised HDB resale flat, and lowering the Loan-to-Value (LTV) limit for HDB housing loans from 90 per cent to 80 per cent.

What does it mean for potential buyers and sellers?

With the increased flat supply from BTOs being launched and 16,000 flats expected to fulfil their Minimum Occupation Period (MOP), buyers have more options and are less pressured to offer high bids. Furthermore, first-time homebuyers with families are more incentivised to ballot for BTOs given the bump in CPF Housing Grants up to $80,000. 

Spending has been more conservative as well with looming recession woes and retrenchment. However, HDB resale flats are still the cheapest option for local couples to own a move-in ready home. We can expect demand to stay strong for 2023. If you're not in a rush, buyers will retain a larger bargaining power. 

Where can you access historic information?

As trained by our local education system, we always prefer more information to make an informed decision, especially when it comes to committing to a six to seven-figure purchase. Historic information on past RPI helps understand market trends. The best thing is that all this information is available in the public domain for access at your convenience. 

You can gain insights into the factors driving the rise of HDB resale prices by accessing historical data on the HDB RPI. Analyse past trends, identify key drivers, and anticipate market conditions to cut the best deal. 

What drives the rise of HDB resale prices?

When you're financing a loan for the next 20-30 years, you can't help but wonder why resale property in Singapore is so costly. This can be attributed to several factors. 

Post-pandemic, buyers now prefer larger flat types propping up prices. This quarter, price growth was driven largely by four-room and five-room HDB resale flat transactions. During Q2 2023 (as of June 27, 2023), 45.8per cent of the 5,969 transactions were four-room flats (2,735 units transacted), and five-room flats made up 23.3 per cent of the overall transactions (1,388 units).

As mentioned above, HDB resale flats are still the cheapest option to own a move-in ready home. Despite government cooling measures, HDB resale prices have continued to climb for 13 consecutive quarters since 2020. 77.8 per cent of home purchases were made by Singaporeans from Jan 1 to June 13, 2023. 

Intergenerational wealth transfer plays a significant role. 27 per cent of Singapore's population falls within the baby boomer generation and unlike earlier generations, they have fewer children. Baby boomers can help finance their children's property purchases. It's perfectly reasonable to afford a resale flat with their bank and CPF savings. 

Rising rental costs, driven by the pent-up demand from delayed property completion, have seen up to 70 per cent increase since 2022. When you are paying that much more, the opportunity cost to finance a loan for a new home becomes much lower. Locals would rather divert their rental into home loan repayments. Moreover, resale flats offer substantial housing grants to cushion their purchase. 

Will HDB resale prices continue to rise?

Here's the truth: until there is ample supply for BTOs that are ready for move-in or oversupply in sellers for resale flats, we will likely see increasing demand. The median price of a resale flat reached $500,000, representing a $100,000 increase compared to the same period in 2022. 

There's still some good news out of this. Thanks to the cooling measures, we are seeing a slowdown in transaction volume. The 10,000 HDB resale flats were sold in the first quarter of 2023, which is lower than the 12,000 units sold during the same period last year. 

We can expect price growth to gradually move sideways, indicating a potential stabilisation of resale prices in the future. Prices are kept buoyant as buyers are willing to pay a premium for space in a prime neighbourhood. 

There will still be gradual increments. At the very least, there won't be a shocking gap in the pricing gap expectation between buyers and sellers as compared to the Covid years.

What is the private housing version of the HDB RPI?

If you are tired of competing in the overcrowded resale market and have the financial ability, private housing (such as condominiums, apartments, and landed houses) is another option to consider. To get a better understanding of the private housing market, we refer to the quarterly flash estimates provided by Urban Redevelopment Authority (URA).

Here’s what you should know:

• Private residential property prices have decreased by 0.4 per cent in Q2 2023. This comes after a 3.3 per cent quarter-on-quarter increase in Q1 2023, marking this the first quarter of price decrease after twelve consecutive quarters of price growth.
• The fall in prices was mainly driven by properties in the Rest of Central Region (RCR) where prices fell by 2.6 per cent in Q2 2023.
• The decline for non-landed properties was marginal. Prices of landed properties saw their smallest gain in two years.

What are the drivers behind price moderation for private home prices?

Outside Central Region (OCR) prices noted the strongest price growth, bolstered by HDB upgraders

Price growth in the OCR increased by 1.2 per cent for the recent quarter, seeing a slowdown compared to the 1.9 per cent increase in Q1. These moderate gains are largely boosted by the performance of Blossoms By The Park, selling 73 per cent of its units at the launch. The project was the fourth best-performing non-landed private residential project, selling 212 units (as of June 26, 2023). 

This project was the first major new launch after the announcement of the latest property cooling measures. With the ABSD hikes to discourage foreign buyers and investors from buying multiple properties, demand is largely being driven by locals, particularly from HDB upgraders.

Rest of Central Region (RCR) prices saw a dip but was cushioned by new condominium launches

This quarter, the RCR saw a price dip of 2.6 per cent after a 4.4 per cent increase in Q1 2023.

New major RCR launches-Tembusu Grand, The Reserve Residences, and The Continuum were well-received. The Reserve Residences was the best-performing non-landed private residential project, selling 589 units; while Tembusu Grand came in second, selling 362 units. The Continuum took third place, selling 229 units.

Also, intergenerational wealth transfer is keeping the market resilient. Q2's new major launches are located in districts with large enclaves of nearby landed homes. This is an attractive incentive for parents hoping to have their children live close to them. We observed a group of buyers who are assisted by their parents in the financing of private property.

Will private residential property prices continue to moderate?

Adjusted Additional Buyer Stamp Duty (ABSD) rates have buyers reevaluating their property choices.  Some are re-evaluating their buying decisions and have become more selective of their choices, many have still decided to proceed. However, 75 per cent of respondents indicated they are open to purchasing a residential property in the next 12 months (from November 2022 to November 2023).  

More land will be released for residential property development in the 2H2023 Government Land Sales programme, including the 6.5ha Jurong Lake District site. This could see prices and rents moderate further in the next two to three years.

Closing thoughts

If you are on the lookout for a ready move-in home, a resale flat will be your most economical choice. All the more so that you should follow the policy changes announced by HDB and the resale price index to project where the market is heading. 

Gone are the days when you can easily flip a resale flat for profit. What's more practical now is timing it right and purchasing a home of your liking at fair market value.

ALSO READ: Pinetree Hill review: 88% of land for facilities and unblocked views in Ulu Pandan

This article was first published in MoneySmart.