Condo dreams fading for HDB upgraders

HDB upgraders’ dreams of acquiring suburban condominiums are drifting further out of their reach.

This is due to the record property prices coupled with the property cooling measures implemented by the government.

According to property consultancy DTZ Research, seven out of 10 home buyers in Q1 2009 were HDB upgraders. However, this figure fell to about 3.5 out of 10 home buyers in 2010. Chua Chor Hoon, Head of Southeast Asia Research at DTZ, said this proportion remained the same in January and February this year.

Some industry experts feel that the figure may drop further in March, if private property prices continue to climb.

Many HDB upgraders have gone cold on mass-market condos for two main reasons — the cooling measures implemented by the government and the soaring prices of suburban homes.

Latest figures show that prices of suburban homes rose 3.1 percent in Q1 this year, surpassing the 2.1 percent increase in the previous quarter. This increase occurred at a quicker pace than the overall 2.1 percent increase in the private market in the first quarter.

A report by real estate services firm CB Richard Ellis (CBRE) showed that three in four units at the 561-unit Waterfront Isle development in Bedok were sold at an average price of S$990 psf, while 250 out of the 521 units at H2O Residences in Sengkang were sold at a median price of S$920 psf.

Adam Tan, a PropNex spokesman, said that while a 1,600 sq ft executive flat in Bedok Reservoir now costs S$620,000, a unit at Waterfront Isle of comparable size costs S$1 million. This means that a resale flat is 40 percent cheaper, though it is 60 percent larger.

Older condo units in the vicinity like Baywater and Aquarius By The Park are also cheaper than new ones but are priced at the S$700 psf to S$800 psf level.

“The feeling on the ground is (that) the high prices may force many potential HDB upgraders to stay within the HDB bracket. If this trend continues, we will see a limited number of people upgrading to private property,” said Mr. Tan.

Meanwhile, National Development Minister Mah Bow Tan said that the median COV for HDB resale flats in Q1 ranged between S$20,000 and S$21,000.

Chris Koh, Director at Dennis Wee Group (DWG), noted that this came as a surprise, as they had been expecting the COV price to slip below S$20,000 after the August 2010 cooling measures.

“The HDB resale market could likely be supported by demand coming back from this segment of HDB upgraders,” he said, adding that there could also strong demand for bigger units

Ms. Chua feels that the number of HDB upgraders seeking to acquire private units may not fall as much as expected, because of the proliferation of “shoebox” units like those at Loft@Stevens, Loft@Holland and Palmera East in the East Coast area.

However, buyers will purchase not for owner occupation but for investment.

“There will still be those HDB upgraders who will buy for investment. And these small units are selling well because their absolute price is still within their budgets,” she said.