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4 HDB predictions for the second half of 2022

Interest rates are on the rise and a potential recession could be on the horizon in the US. Now that we're coming off a really strong HDB market, what should your next play be? Last December, we predicted that the HDB markets will remain strong in the first half of 2022.

Seven months have flown by since, and we can all agree that July this year looks a lot different from the last. For starters, and to the displeasure of our friends living in Eastern Singapore, planes are taking flight once more. F&B businesses are seeing larger groups and events have resumed. The economy is reopening and interest rates are on the rise. Do our predictions from last year still hold any water?

Did our prediction come true?

The reality is that the momentum did remain strong and sales volumes have remained almost identical. Between January to June, there were close to 13,000 units that were transacted. The same period last year saw a difference of barely 500 units. Why is this happening? Well, with home priority set towards space and value PSF, buyers in the market continue to have conservative home budgets. The valuation of homes increased, but so did the asking prices of sellers. Thanks to the strong momentum within the market, sellers have generally become more bullish. More often than not, buyers have to pay a cash over valuation.

What should your next move be?

The discrepancy between buyers and sellers is obvious. As a seller, you will probably be able to ride through the market and have the unit taken off your hands. Of course, this would require you to price reasonably. Now is not the time to quote a king's ransom. All you have to do is monitor your asking price against your neighbors' to ensure that it is competitive. As a buyer, we doing your "homework" on open data sources. The HDB website, for example, will show prices that have been transacted within your estate. Because the setting of prices is often an ongoing discussion between owners and agents, asking and transacted prices tend to be close. This helps to streamline your process of identifying potential units.

Prediction 1: There will be growing popularity of older flats in prime locations.

For higher quantum flats in the central region, prices are continuing to escalate. Buyers looking for a unit in the private segment today might be left wanting, and their budgets would also appear to be smaller. This will prompt a recalibration of their desired products and an eventual shift towards the HDB segment. Buyers who can afford to monitor the market and grow their wealth in the next five years from the comfort of a larger space may just opt to play the game of delayed gratification.

Prediction 2: There will be increased demand for 3-room flats in prime locations.

Have a scroll through #renotok or inspirational videos on YouTube and you will notice that singles and dinkies are snapping up 3-room flats, gutting it out, and transforming them into their dream homes at least for the next five to seven years. At the same time, as older homeowners give up their condominium units and landed homes, they might tend towards downsizing and holding onto cash. To this group, their wealth is a means of assisting their children with property purchases. The combined effect of these two trends may well fuel the prime location 3-room flat segment in the next six months.

Prediction 3: The market will be a tale of two halves.

There are two ends to this equation—the market will either taper off or see a higher demand. While prices should continue to remain strong, enquiries seem to be subsiding. This is a sentiment shared by my colleagues in the industry. Whether or not this will influence sales volume truly boils down to price expectations. If sellers are pricing well according to the market and still making decent profits; and buyers are matching them, volume is likely to remain strong.

Prediction 4: The trend for million-dollar flats will increase.

At this point, there have been 166 HDB units that have sold for a million dollars and above. They range between bigger, older units to younger leaseholds or smaller units in the central location. This is a sign that price reality has set in: buyers are no longer apprehensive towards listings that are asking for a million dollars and above. Recently, one of my clients expressed disbelief that a flat in Marine Parade was traded for over a million dollars. Why would anyone fork out that money for such an old flat? Well, the reality of selling a home is that all you need is a single buyer. Heck, they may even have purchased it for unique reasons that do not resonate with anyone else.

By addressing their needs, such as a close proximity to their children's schools, the desire to invest might well take a backseat for the next five to seven years. Even if they sold the unit for the same price upon completing the MOP, it would still have held up as a wise decision that enabled them to meet their needs at a given point of time. Clearly, there are instances where value preposition takes a secondary position in the minds of buyers.

HDB market in H2 2022

If you’re looking for opportunities in the condo or landed segments, this article may interest you. But before making a move in these uncertain times, ensure that your decision is informed, sound, and consulted with your financial advisor and real estate expert. As usual, we are only one text, call, or e-mail away should you wish to get in touch.


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