1 October 2021: Heading to sustainable growth for HDB

HDB resale price still growing at respectable rate
What happened

According to the HDB flash estimates, the price index for HDB resale flats increased 2.7% quarter-on-quarter (qoq) in the third quarter of this year (3Q 2021). With the expansion in 3Q 2021, the HDB resale price index had surpassed the previous price peak in 2Q 2013. After peaking in 2Q 2013, the prices of public flats declined for the subsequent six years. It only started to recover in 3Q 2019. The recent price expansion in the public housing market has been quite healthy. In the first nine months of this year, the HDB resale price index had expanded 8.9%. 

Rate of growth has peaked

The 2.7% price appreciation in 3Q 2021 was slower than the 3.0% quarterly growth in the first and second quarter of this year. This relatively slower but still respectable rate of grow could be a sign that the rate of price growth for public housing has peaked and could be slowing down.

The previous 3% quarterly rate of housing price increase was unsustainable as neither the average household income nor the local population was growing at that rate. Even the rate of household formation, as represented by the number of marriages, decreased last year. Newly formed families are the main source of demand for public housing.

Outlook for HDB resale market

However, the bottlenecks, shortages and challenges in the construction industry, which is contributing to the increase in demand for HDB resale flats and subsequently, the increase in the HDB resale prices, is expected to continue in the short term. Therefore, the HDB resale price index is projected to continue to increase, but at a more sustainable rate for the rest of this year and in 2022. On a year-on-year basis, the index had grown 12.3% in 3Q 2021, which is the fastest rate of expansion in the past 10 years. The price index for public housing could end this year 10% to 12% higher than 2020.

Source:
ERA Singapore Research and Consultation Team