Larger units favoured as three-bedroom private home sales rise to 27% in first 11 months

In the first 11 months of this year, sales of larger three-bedroom private residential units in Singapore saw an uptick, accounting for 27% of total 99-year leasehold private home sales—up from 16% last year. Over the past two years, this proportion had remained below 20%.

Analysts interviewed attribute this trend primarily to sustained private property price growth. Concerned that their children might struggle to shoulder the financial burden of homeownership, many parents have tapped into their savings to assist them. Driven by this additional financial support, demand for larger three-bedroom private homes has risen in tandem.

Data reveals that while smaller private homes such as two-bedroom units remain the most popular choice among buyers, sales of larger three-bedroom units trended upward over the first 11 months of the year, with their share of total transactions surging to 27%.
Three-bedroom units typically range from 829 sq ft to 1,055 sq ft, whereas two-bedroom units generally span between 614 sq ft and 818 sq ft.

Current private housing demand is largely powered by the baby boomer generation. These Singaporeans aged 60 to 70—who avoided structural unemployment and reaped the benefits of rapid economic expansion in the 1960s and 1970s—have accumulated substantial savings, making them a crucial source of financial backing for their children's private home purchases.

Two-bedroom units remain top sellers

Another factor bolstering private home demand is the rising number of million-dollar HDB resale flats. Furthermore, adult children from upper-middle-income families generally command higher salaries; once married, their combined household income frequently surpasses the HDB income ceiling, turning them towards the new private home market. Backed by parental aid, these buyers have the means to purchase larger private residential units.

Despite the growing proportion of three-bedroom unit sales, Teo Min Zhang noted that two-bedroom units remain the top-selling segment, as their prices remain within an accessible range for Singaporeans looking to enter the market for rental yields.

An increasing number of buyers are opting for two-bedroom over one-bedroom units. For example, the recently launched Emerald of Katong sold out almost its entire inventory, leaving only six one-bedroom-plus-study units available.

Developments such as The Chuan Park and Nava Grove also only offer two-bedroom or larger configurations.

Following the implementation of the harmonisation of floor area definitions, buyers who were previously restricted by budget to two-bedroom units can now consider purchasing three-bedroom homes.

Lentor Mansion saw 84% of its three-bedroom units snapped up during its launch weekend, with demand driven largely by families with young children seeking homes in close proximity to primary schools.

A project's unit mix ultimately depends on its attributes, prevailing market demand, affordability, target demographic, and location. While healthy demand is evident across diverse unit types, smaller layouts remain widely favored for their more accessible entry prices.

HDB resale prices climb nearly 40% between late 2020 and Q3 this year

From late 2020 through the third quarter of this year, HDB resale prices have jumped 39.5%. By comparison, median prices of new private homes in the Rest of Central Region (RCR) and Outside Central Region (OCR) grew by 28.3% and 29.2% respectively. The narrowing price gap between HDB flats and private property has similarly encouraged more HDB upgraders to acquire new private homes for owner-occupation.

Beyond parents' financial capacity to help, emotional factors are also at play. Rather than acting out of FOMO (fear of missing out), parents are largely motivated by anxieties surrounding today's volatile, uncertain, complex, and ambiguous climate. The more parents worry about their children being priced out, the more committed they become to providing substantial financial assistance.

With property prices steadily ascending, parents who benefited from capital appreciation in earlier years worry their children will face immense home-buying hurdles, triggering intergenerational wealth transfers to help their children secure a home.

Trend of parental financial support expected to continue for one to two years

The phenomenon of parents funding all or part of their children's home purchases is expected to persist for the next one to two years. As this group of parents gradually depletes their savings, the subsequent generation of parents may take on the mantle. However, due to declining birth rates since the 1970s, this demographic pool is likely to shrink.

Nonetheless, supported by the ongoing rise in million-dollar HDB resale transactions, the next wave of private residential buyers will continue to emerge.