Press Release

HDB resale prices rose amid robust economic growth and strong employment

HDB resale prices rose faster by 2.6 per cent last quarter compared to the 2.4 per cent quarter-on-quarter increase in Q1 2022, according to the public housing data from HDB. Year-to-date basis, prices have risen by 5.1 per cent over the past 6 months. On a year-on-year basis, prices climbed by 11.8 per cent.

The continual price growth did not come as a surprise since buyers’ confidence here has improved substantially. Our economy is almost fully reopened and growth has picked up faster than in many other countries. 

Further, the public housing market is usually less susceptible to macroeconomic fluctuations, unlike investment properties. Critical drivers like our employment rate and income growth remain healthy, which have kept the public housing demand stable. 

The median resale price of flats in 21 out of 26 towns increased last quarter. When compared to the first quarter of this year, the median resale price in Central Area (18 per cent), Ang Mo Kio (17.5 per cent), Serangoon (14.2 per cent), and Queenstown (11 per cent) rose the most in Q2 2022, according to HDB data downloaded from data.gov.sg on 30 June 2022. The median resale price of resale flats in non-matured estates rose 3 per cent from S$500,000 in Q1 2022 to S$515,000. The median resale price in matured estates similarly increased at a faster pace of 6.9 per cent, from S$524,000 to S$560,000 over the same period. 

Mortgage rates have been rising, and Singapore’s largest lender, DBS, has recently removed its five-year fixed rate HDB package. The fixed-rate mortgages from many banks are now higher than the HDB loan rate of 2.6 per cent, which is pegged at 0.1 percentage points above the Central Provident Fund Ordinary Account rate of 2.5 per cent.

The impact of the interest rate hikes will be dependent on the loan quantum and borrowing profile of HDB homeowners. Most flat owners may not be too adversely affected by the rate hikes now, given that safeguards are in place. All borrowers are subjected to the mortgage servicing ratio (MSR) and total debt servicing ratio (TDSR), limiting the amount of money one can borrow based on their income. As the loan quantum for most flats is not large, those who took private loans should still be able to service their mortgages. 

First-time buyers who have not taken any loans will likely apply for an HDB loan since the latter’s rates are lower. Further, HDB loan rates are not subjected to fluctuations, thus providing more financial stability for borrowers. Some borrowers may take up an HDB loan first and switch to a bank mortgage should rates drop later. However, they cannot return to the HDB after taking a bank loan. 

However, the impact may be more keenly felt when private loan rates move above 3.5 per cent. When interest rates for home loans are high, borrowers may be reluctant to spend too much on a new flat since buyers are faced with less affordability and lower borrowing power. Housing demand and prices may moderate when more buyers turn cautious in their home purchases.