Price Gap Analysis: Is the Gap Between HDB Resale and Condo Prices Narrowing?

Over the past four years, a distinct trend has emerged: median HDB resale prices have climbed steadily. Remarkably, during 2020 and 2021, their price growth outpaced both median resale and new launch private residential property prices.

Growth Moderation (2022 – 2023)

However, the robust figures of earlier years moderated in 2022 and 2023. This deceleration can be attributed to heightened price resistance and the cooling measures introduced in September 2022. These measures included tighter HDB loan limits and the implementation of a 15-month wait-out period for private property owners before they can purchase non-subsidised HDB resale flats.

Price Reversal from 2014 to 2019

In 2022 and 2023, a significant turnaround took place as median resale flat prices rebounded after six consecutive years of decline between 2014 and 2019. In 2022, prices rose by 9.2% to S$499 psf, followed by a 6.2% increase to S$530 psf in 2023.

Comparison with Condo Prices

Comparing the growth of median HDB resale prices with that of median condo resale prices yields an interesting takeaway. Despite the cooling measures, resale condo prices posted robust growth of 11.1% in 2022 and 10.7% in 2023, outstripping the price growth of resale HDB flats.

Record-Breaking Resale Transactions

Several HDB flats even crossed the S$1,000 psf threshold, setting new benchmarks. This is noteworthy, especially considering that new launch condo prices in the suburbs have surpassed the S$2,000 psf mark.

In fact, in December 2023, a 1,001 sq ft 4-room HDB flat along Cantonment Road made headlines by fetching a record-breaking S$1,409 psf.

Factors Driving HDB Resale Unit Prices

A surge in HDB resale transactions, a shift in demand from Build-To-Order (BTO) flats to the resale market, and condo owners downsizing to resale HDB flats have all played pivotal roles. Pre-pandemic policy enhancements, such as allowing buyers greater CPF usage for resale flats, further propelled the upward trajectory.

Anticipated Price Gap Convergence in 2024

Looking ahead, the government's push to ramp up new BTO supply and introduce more flats with shorter waiting times could contribute to a moderation in median resale flat price growth.

Expectations are high for shifts in transaction patterns in early 2024, particularly as the first batch of private property downsizers completes their 15-month wait-out period. This period could witness shifting market dynamics, offering valuable insights into homebuyers' evolving preferences.

Price Movements: New Launch vs Resale Condos

Delving into the private residential sector, let us examine the pricing trends between new launch and resale condominiums. Notably, the price gap that once widened is now showing signs of narrowing.

While buyers often gravitate towards new launches, resale condos remain appealing for their immediate availability and potential as rental investments.

Reasons for the Narrowing Price Gap

The primary driver behind the narrowing price gap has been the accelerating price growth of resale condo units. In Q3 2023 alone, average resale prices climbed by 7.3% year-on-year.

District Analysis

Analysing specific areas, the price gap in Districts 9 and 10 appears to be widening, whereas the gap in District 15 has narrowed. This is due to stronger price appreciation among new launch units compared to resale condos in prime districts.

Moderating Growth in Private Home Prices

Looking at the broader picture, private home price growth across the property market has been moderating. Prices rose by 6.7% in 2023, compared to 8.6% in 2022 and 10.6% in 2021.

In Q4 2023, prime locations (Core Central Region or CCR) saw growth of 4.2%, and the suburbs (Outside Central Region or OCR) grew by 4.6%, while the Rest of Central Region (RCR) slipped by 1.2%.

This could point towards market stabilisation, as transaction volumes fell by around 27% quarter-on-quarter in Q4 2023. Total sales volume for the whole of 2023 dropped by 15% compared to 2022.

What Does This Mean for Buyers?

Prospective buyers stand to benefit from this evolving landscape.

As the price gap narrows, upgrading from a resale HDB flat to a private condominium could become financially more feasible.

For value-conscious buyers, the widening price gap in prime districts presents opportunities to secure attractive deals in the resale market.

Overall Outlook for Private Residential Property in 2024

Looking ahead, up to 29,350 units are projected to be available for sale in 2024, including Executive Condominium (EC) projects. Sustained interest from investors and local homebuyers is expected to keep the property market resilient.

Analysts anticipate that private home price growth may continue to moderate in 2024, with full-year gains estimated at around 3% to 6%. Increased housing supply via the Government Land Sales (GLS) programme is also expected to contribute further to market stability.