Property upgraders dream. Will I be priced out?

by Alan Wee
11  May 2018

That upgraders dream. Will I be priced out?

The property market today faces a very unusual trend lately. Public and private residential prices have been a tale of two halves. Private prices increased by 3.9% in Q1 2018 whereas HDB prices declined in 2017.

Why is this so?

Private property prices increase is due to the following:
1. Positive sentiment in the general economy
2. Strong buying demand from upgraders, investors and foreigners
3. Displaced enbloc owners buying replacement private properties
4. Less resale stock mainly due to old condo sold enbloc

Singapore HDB flats

On the other hand, HDB prices have fared poorly due to the following:
1. BTO flats indirectly absorb demand away from the resale market
2. HDB upgraders moving into newly completed condominiums
3. A reduction of PR buyers
4. Aging HDB flats with depleting leases have also played a part in the decline in HDB prices.

Going forward, new private properties are expected to launch at $1,300-$1,500 per square foot onwards for suburban locations.

The average suburban HDB flat prices are in the range of $400-$500 per square foot. This means that new launch prices could be 3 times as much as a HDB flat.

Hence, will HDB upgraders be priced out from the private market?

Most would be.

So as HDB upgraders, what should you do next if that new launch condo is beyond your reach today?

There are alternatives:
1. Buy an executive condominium, which is typically priced at a 10% to 20% discount to private condominiums
2. Buy a resale condominium or resale executive condominium as they tend to be lower priced than new launches

As private property prices are expected to grow an estimated 7% to 10% this year, HDB owners who are looking to buy a private property will have to move fast.