Home prices are likely to trend further downward this year amid recessionary fears and in the absence of a strong stimulus in the recent budget announcements. Against this backdrop, households that are sitting on hefty profits might consider selling their properties and using the proceeds to bottom-fish for value deals, or to rent a home in the interim until the market bottoms.
At least six BTO projects fulfil their MOP in 2016 and are sitting on hefty profits
Compassvale Pearl, Coral Spring, Damai Grove, Jade Spring, Punggol Spring and Segar Meadows have recently fulfilled, or will soon fulfil, their five-year Minimum Occupation Period, which means they can be resold. The MOP commencement date was estimated based on their lease start date less one year.
Owners stand to gain hefty profits ranging from $150,000 to more than $200,000. Given that 2007/08 BTO prices for a four-room flat were in the region of $170,000 to $270,000, the profit margin works out to at least 50%. The profits were estimated by comparing the simple average of the BTO price range with recent transactions.
Graphics by Kim SY/ The Edge Property
At some projects, prices could have doubled. For example, fourroom flats at Damai Grove in Punggol were launched at between $195,000 and $240,000. The first two resale transactions at the Damai development took place in March, involving four-room flats which were sold for $445,000 and $450,000 respectively. The flats are located between the 10th and 15th floors, based on HDB transaction records.
Among the six projects, those in Punggol have fetched higher prices on the resale market. They have yet to feel the brunt of competition from the ramp-up of BTO supply in later years, which is still constrained by the MOP conditions. At the same time, they benefited from the transformation of Punggol into a waterfront eco-town .
Those who bought from the resale market not as lucky
On the other hand, half the households that bought on the resale market in 2011 could incur losses if they sell now. Based on their sales completion date in 2011, there are more than 11,000 four- and five-room flats that have recently fulfilled, or will soon fulfil, their MOP, excluding adjoining units, maisonettes and terrace homes.
However, based on the simple comparison of their purchase price in 2011 with the median prices of four- and five-room flats in their respective towns in 4Q2015, half of them could incur losses. To be fair, this is a very broad comparison that does not account for proximity to an MRT station and other attributes that may impact prices.
Woodlands, Sengkang and Jurong West have the highest number of four- and five-room flats that will fulfil their MOP in 2016, totalling around 4,200 units. However, if you compare the median resale prices of four-room flats in 1Q2011 and 4Q2015, the price appreciation is just $9,000 for Woodlands and $3,000 for Jurong West. Four-room flat prices in Sengkang, meanwhile, have declined by $8,600 over the same period.
Households in some mature towns can still potentially reap decent profits
Around 1,000 four-room resale flats in Bishan, Bukit Merah, Kallang/Whampoa, Queenstown and Toa Payoh will fulfil their MOP this year. Their profit is potentially more than $50,000 if you compare the median price in 1Q2011 and 4Q2015. This works out to a 15% to 20% profit margin over five years, which is slightly higher than the targeted annual inflation rate of 2% to 3%.
For five-room flats, those located in Ang Mo Kio, Bedok, Bishan and Toa Payoh could potentially yield a profit of more than $50,000 for the seller. About 500 five-room flats in these towns will fulfil their MOP this year.
This article appeared in the Edge Property Pullout, Issue 722 (April 4, 2016) of The Edge Singapore.
If you wish to check out the procedures of selling your HDB flat or find out the valuation of your HDB flat, do feel free to contact Irene Tan at 9846 9648 for a non-obligation discussion.