According to the HDB public housing data for Q1 2023, the approved applications to rent out HDB flats surged by 13.9 per cent from 8,476 units in Q4 2022 to 9,657 units in Q1 2023. On a year-on-year basis, volume declined by 5.2 per cent from 10,189 units in Q1 2023.
Rental demand increased as tenants returned to the market after the year-end holidays, and leasing activities increased after the Chinese New Year period. Some tenants shifted downstream from renting private properties to HDB flats as rent prices have surged significantly Islandwide, and many are looking for cheaper accommodation.
Although more flats have been completed, most cannot be leased immediately as they need to obtain the minimum occupation period first. It will also take time for local tenants to vacate their rental premises and shift to their new homes,
Moreover, the HDB rental stock may shrink over time since fewer flat owners are keeping their units for rental income as they have to sell their units before upgrading to a private home to avoid the ABSD. The increased ABSD, tightened loan limits, and escalating private home prices have also hampered buyers' affordability, meaning fewer flat owners can keep their HDB flats for rental while they stay in private homes.
Rising interest rates, inflationary pressures and high resale prices have crimped buyers’ purchasing power. As housing affordability takes center stage, small resale flats will continue to find favor with buyers.
In addition, since more grants will be given to first-timers purchasing 4-room and smaller flats, demand for small flats will likely rise faster than for big flats.
From August 2023, stricter rules will be imposed for the non-selection of BTO flats. First-timers who lose their priority when they reject HDB's offer to pick BTO flats will likely turn to the resale market. Therefore, demand for resale flats may increase further in the second half of this year. The total sales volume may reach 23,000 to 26,000 units this year. Resale prices may continue to climb, but at a slower pace of 5 per cent to 8 per cent in 2023, compared with 10.4 per cent in 2022 and 12.7 per cent in 2021.