[SINGAPORE] Lifting the 15-month wait-out period for owners of private homes seeking to buy public housing flats may trigger a rebound in resale prices, analysts said, as tight supply and firm demand continue to underpin the market despite signs of price moderation.
The temporary restriction was introduced in September 2022 and requires private property owners to wait 15 months after selling their homes before they can buy a non-subsidised Housing and Development Board (HDB) resale flat. Seniors aged 55 and above moving into four-room or smaller flats are exempt.
New National Development Minister Chee Hong Tat recently said that the government may review or remove the wait-out period when HDB resale flat prices begin to moderate.
With greater financial means from the sale of their private properties, these buyers were able to pay more when buying resale flats, including million-dollar flats with compelling attributes, he added.
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In the third quarter of 2022, just before the measure was implemented, resale flat prices rose 2.6 per cent on quarter and 11.6 per cent on year. Price growth was driven by the rates of larger units, with the median price of executive flats climbing 4 per cent on quarter to S$780,000, and that of five-roomers rising 3.3 per cent to S$630,000.
Analysts acknowledged that the wait-out period helped cool demand in the early months.
The sales volume and average prices of five-room and executive flats eased immediately in the fourth quarter of 2022 and continued to soften for 15 months, said Lee Sze Teck, senior director of data analytics at Huttons Asia.
Overall price growth of resale flats slowed to 2.3 per cent in Q4 2022, in the smallest quarterly increment since Q3 2020, and transaction volumes of five-room and executive flats fell 19.3 per cent and 22 per cent on quarter, respectively.
But by January 2024, demand rebounded as the first group of former private property owners who had been subject to the 15-month wait-out entered the market.
“Volume and average prices of five-room and executive flats increased at a faster pace. The situation in the market is almost back to the pre-Q3 2022 period. It appears that the policy was only effective for 15 months,” added Lee.
PropNex data similarly showed that the number of flats resold for at least S$1 million declined and stayed relatively moderate after September 2022, before climbing again in 2024 and after.
ERA Singapore’s key executive officer Eugene Lim said that demand has outpaced the supply of flats coming out of their minimum occupation period (MOP) in prime locations, thus sustaining price growth.
Year to date, there have been 368 million-dollar transactions involving five-room and larger flats, up from 229 in the same period last year, ERA data showed.
There has also been an uptick in million-dollar flat transactions involving four-room flats that have reached their MOP in mature estates, noted Lim.
Year to date, there have been 254 four-room flats that were sold for a million dollars or above, up from 93 in the corresponding period in the previous year.
Huttons Asia’s Lee said that it is “not advisable to review the policy” at this point when prices are climbing again and the supply of MOP flats, especially five-room and larger units, remains tight.
Christine Sun, OrangeTee’s chief researcher and strategist, noted that the supply of MOP flats has been decreasing since 2022 and that the limited supply has likely caused prices to rise continuously over the past few years.
She had previously estimated that just 6,974 resale flats will enter the market in 2025 – the lowest in 11 years – before supply recovers to 13,480 units in 2026.
Still, it could take about one to two years for the supply changes to “ripple through the market and impact pricing”. A “more significant” effect from the supply ramp-up is likely to be seen in two to three years, when a substantial number of flats that have reached their MOP are expected to come into the resale market, said Sun.
She added that prices are currently holding steady and falling interest rates are expected to fuel housing demand.
“Hence, the timing for rolling back the restrictions is important. (The government) may want to align this with the supply projections while taking into account the broader macroeconomic conditions.”
Nonetheless, Gafoor believes that an ample supply of Build-To-Order (BTO) units and existing curbs mean that lifting the wait-out period may not spark a major price surge.
He expects resale prices, which have been up 19.6 per cent since Q3 2022, to grow at a slower pace due to a “high base effect and as price resistance sets in”.
That said, ERA’s Lim cautioned that prematurely rolling back the restriction may risk “triggering a rebound in resale price growth”, which the policy originally aimed to moderate.
Gafoor noted that the government could likely watch the market for another quarter. “If resale prices continue to moderate in Q2, then there is a chance that we may see the removal of the 15-month wait-out period in the second half of 2025.”
Lim added that the authorities could consider allowing appeals on a case-by-case basis for private homeowners, who need to downgrade but do not currently qualify.
Flats fresh out of their MOP also see stronger demand and faster price growth due to their longer leases and better conditions, he noted.
If more BTO flats with shorter wait times are launched, first-timers with urgent housing needs may choose the BTO option instead of resale, thus easing demand and helping to stabilise prices, he added.
“When this happens, the government may then consider relaxing the 15-month wait-out period.”
