4 reasons behind the loss of appetite for private homes
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Loading... - Fusae Endo
- 27 Sep 2022
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Monday (August 29), there was an article in The Straits Times titled “Drop in appetite for private homes among some HDB owners”. It said HDB upgraders’ love affair with private properties has cooled in the first half of this year.
According to URA’s data, buyers with HDB addresses only bought 3,649 new and resale non-landed private homes. The figure was down 26.2 percent from 4,942 in the first two quarters of last year. The drop was more obvious in new non-landed private homes sold by developers. A mere 975 units were purchased by HDB owners. It was 51.5 percent lower than 2,012 units sold during the same period in 2021. This is despite the fact that prices of HDB resale flats and private homes climbed 5.3 percent and 4.2 percent respectively.
So why are HDB owners no longer keen to upgrade to private homes?
The article cited last December’s property curbs and higher mortgage rates the two main causes behind the loss of appetite. However, from what we see in the current market, there are four major reasons behind the fast shrinking of private home sales transactions.
Reason #1: The loss of market confidence from developers
Higher ABSD and mortgage rates may be the push factor. But the weak pull factor from the developers is also to blame.
Local property agencies and our vested media may continue to brainwash us that “homebuyers sentiments remain positive”. But on the other hand, the developers show us that they believe otherwise and behave the opposite way.
Because all developers understand one critical thing: When there is no more low interest rates and cheap money flowing around, the “pent-up demand” from both HDB upgraders and investors will dry up quickly.
The article said that developers are highly cautious now and holding back launches. In fact, there was an unprecedented drop in new launches in the last two quarters. The 2,569 units launched during this period were an 18-year low. That implies developers’ market confidence of private residential home sales is even lower than during the last Global Financial Crisis in 2008. But it is slightly better than the post-SARS economic downturn in 2004.
As buyers, we see the same “old” projects being relaunched repeatedly to push unsold units. No wonder market excitement is fading. The situation is similar to fishmongers selling seafood in the wet market. When they first open a new box of seafood, buyers are excited. They rush to pick the freshest ones despite higher prices. But when fishmongers have been displaying the same seafood for a long time, interest from buyers wanes. The leftovers can only be cleared with price reduction.
Reason #2: The shrinking affordability of private homes
The article mentioned that private homes valued up to $1.5 million used to be most popular among HDB upgraders. These private homes accounted for 80 percent of transactions in 2019. But the percentage fell to 72 percent in the first half of 2021 and 62 percent in the first half of 2022.
Property agencies said some HDB upgraders may have difficulty paying the higher ABSD upfront after selling their HDB flats. Other buyers may be priced out with the widening price gap between HDB resale flats and new private homes. Read More…
