Non-mature HDB Towns Gaining Popularity And Closing Price Gap On Mature Estates

By PropNex Research and Editorial

As the saying goes: a rising tide lifts all boats. That was certainly the case with the HDB resale market in 2021 where a broad-based price increase was observed across various flat types in both mature and non-mature HDB estates.

Based on the flash estimate, HDB resale values rose by 12.5% in the full-year 2021, with some 30,000 resale flats transacted. Despite the new cooling measures imposed on 16 December 2021, PropNex still expects HDB resale prices to grow, albeit at a slower pace of 6% to 8% in 2022. Resale volume could remain stable at 30,000 flats this year as Singaporean households and first-time home buyers – who are less affected by the new property curbs – account for the bulk of resale flat demand.

Transaction data showed that average HDB resale prices in non-mature estates have risen at a faster pace in recent years, compared with that of mature towns (see Table 1). For instance, the average resale prices of 3-,4-, and 5-room flats in non-mature towns jumped by 13.7%, 12.8% and 12.4% YOY in 2021, outpacing the 12%, 11%, and 9% growth for the respective flat types in mature estates. This trend was also observed in 2019 and 2020.

Table 1: Average HDB Resale Price Comparison: Mature* vs Non-Mature

Source: PropNex Research, Data.gov.sg (retrieved on 3, 4 Jan 2022)
*Mature towns: Ang Mo Kio, Bedok, Bishan, Bukit Merah, Bukit Timah, Central Area, Clementi, Geylang, Kallang/Whampoa, Marine Parade, Pasir Ris, Queenstown, Serangoon, Tampines, Toa Payoh
**Non-mature towns: Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands, Yishun

Based on the pricing data, it would appear that resale values in mature towns were more resilient, either falling at a slower pace or inching up slightly from 2014 to 2018, following several rounds of cooling measures implemented by the government in January, June, and August in 2013.

However, it is interesting to note that prices in non-mature towns have recovered sooner and at a faster rate from 2019 onwards. The faster pace of price increase could be due to non-mature estates starting to find favour among more buyers as improved transport infrastructure and amenities bring more convenience to residents. The growth and development of regional centres such as the Jurong Lake District and new employment nodes like the Punggol Digital District also bring jobs closer to home.

In addition, some buyers may opt for newer flats with longer lease in non-mature towns such as Sengkang and Punggol, while others are attracted to the more affordable pricing in non-mature estates, compared to those nearer to the city.

Furthermore, the higher absolute resale values in mature towns will also limit the rate of price growth as buyers may become more resistant to price increase. On an absolute price quantum basis, mature estates still led HDB resale values with average transacted price for 5-room flats hitting more than $704,000 in 2021, marking a 34% increase from 2010. Meanwhile, the average resale price of 4-room HDB flats climbed even more, by 40% from nearly $415,000 in 2010 to about $579,000 in 2021 (Table 1).

Higher Number of Pricy Units Sold in Non-Mature Towns

Non-mature estates accounted for about 56% of the estimated 29,106 resale flats sold last year. A high of 173 flats in non-mature towns were resold for $800,000 and above in 2021 – up sharply from 33 in the previous year. The priciest resale flat in non-mature estates in 2021 was an Executive flat in Woodlands which changed hands for $980,000 in October (see Table 2).

Unsurprisingly, many of these flats share certain attributes that would fetch a premium price. These include having a spacious floor area, being a unique flat-type such as Executive flats, located on a high floor, or having a lengthy remaining lease of more than 90 years.

Table 2: HDB Resale Transactions of $900,000 and above in Non-Mature** Towns in 2021

Source: PropNex Research, Data.gov.sg (retrieved on 3, 4 Jan 2022)
**Non-mature towns: Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands, Yishun

On a PSF basis, most average prices have risen across the non-mature towns, with nine out of 11 towns witnessing consecutive annual growth from 2018 to 2021 (see Table 3). Last year, every non-mature town had an average PSF price crossing the $400 mark – likely a first, as this feat was not seen even during 2013 when HDB resale values peaked.

Table 3: Average Unit HDB Resale Price in Non-Mature** Towns from 2018- 2021

Source: PropNex Research, Data.gov.sg (retrieved on 3, 4 Jan 2022)
**Non-mature towns: Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands, Yishun

Tracking the sales of 3- to 5-room resale flats, the average price gap between non-mature towns and mature towns has narrowed (see Table 4) steadily from 26% in 2018 to 14% in 2021.

This gap could tighten further should the demand for flats in non-mature towns expand rapidly, pushing up values. Some factors that could fuel buying interest in non-mature towns include their lower price points compared to mature estates and private homes, more attractive estate design concepts, as well as newer flats which would allay any immediate concerns around lease decay.

Table 4: Average Overall HDB Resale Price Gap Between Mature* and Non-Mature** Towns

Source: PropNex Research, Data.gov.sg (retrieved on 3, 4 Jan 2022)
*Mature towns: Ang Mo Kio, Bedok, Bishan, Bukit Merah, Bukit Timah, Central Area, Clementi, Geylang, Kallang/Whampoa, Marine Parade, Pasir Ris, Queenstown, Serangoon, Tampines, Toa Payoh
**Non-mature towns: Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands, Yishun

In view of the new cooling measures and impending interest rate hikes, the price growth could moderate in 2022 as buyers become more prudent about their flat purchase.

Meanwhile, over 31,000 flats are estimated to exit their 5-year Minimum Occupation Period (MOP) in 2022 which means the owners can sell them on the resale market if they so wish. Of note, more than 24,000 of those flats are located in non-mature estates, led by Bukit Batok, Punggol, and Sembawang. These potential supply of new resale flats could help to stimulate demand and help to further support prices as “younger” flats that have recently obtained their MOP tend to command higher prices than older flats in the area.

Contact PropNex salespersons for more insights and key recommendations on the HDB Resale market.