HDB has yet again launched the Sales of Balance Flats just a few days before. The neighbors have been actively discussing about the remaining units being sold in our estate, rejoicing how we have made paper profits for our flats which have yet again appreciated. It is exactly a year since we chose our flats in September 2011 (and we have not moved in!), and prices have increased by an average of 13.62%. Some attributed the increase to our proximity to schools and the NUS which is just a few bus-stops away. Room rental in the estate is on average $800/room and could easily fetch $4000 for whole units in a few years’ time.
So, how do you calculate HDB prices and how high is the inflation for public housing in a year?
I'm one of those excited ones who made a whole excel spreadsheet about the rental yields, resale prices and SOBF prices for all units offered in Casa Clementi in Sept 2011. I did a comparison of the 2011 prices vs 2012 prices only for the exact same unit (4-room flats). Out of the 15 units offered this round, 14 were offered in 2011. Average price was $459psf in 2011 but has went up to a whopping $515psf in 2012. Although sample size is different, it gives a good picture of the direction of price increase within a year. Assuming that a flat costing $500k last September, the same flat would cost about $568k now. That’s a 68k difference in a year, which equates easily to a year’s income for a couple. Factor in the interests paid over 30 years, and the difference can be really substantial. 5-room flats are going for more than $600k in our estate, direct from HDB. I heard Tiong Bahru 5-roomers have hit almost $700k direct from HDB too.
In terms of flat availability, there’s no difference since our flats were ready for key collection 6 months after balloting. This would probably be similar with the current round as flat selection and keys collection are usually 2 different appointments.
Comparing these prices to Clementi Ridges launched a few months ago, it's slightly pricier as Clementi Ridges was selling at an average of $504psf. However, these flats are available now while Clementi Ridges will only be ready many years later - when we are almost eligible to sell our flats.
At this rate, seriously, $1 million flats are totally possible with first-hand prices this high. And would the prices drop someday? I think not, not when PAP is in power anyway. Imagine the backlash if prices dipped and everyone is losing money yet buried in debt. Then again, most people would have to buy another HDB if they were to sell theirs. So unless they are willing to downgrade or move to a less central location, this paper profits would not be realized. I will sell my flat if it hits above $850k!
I love our estate, perhaps because we have got to know quite a few neighbors and have become a close-knitted community in the past few months. Whatever you need, there’s always help nearby. Some days, we have dinner together while others, we do grocery shopping together. I actually like staying in HDB, and I miss the feel of knowing your neighbors well. It brings back lots of childhood memories when grandma used to know the left-right-up-down neighbors. My neighbors have helped me to get stuff from Ikea repeatedly since they were also going down, and helped to get customized acrylic panels for my toilets among other things. Knowing these nice people have made me look forward to moving in and it’s really great to have friends nearby, in your very own estate.
So now, the question is to buy or not to buy? I would still say, buy if you can afford (and happen to be lucky enough to get a ballot number) although it's a lot pricier. But as prices go up, locations become key and central locations with amenities will always command a premium. Even if our housing nose-dives, prices in mature estates will definitely hold better. It won't be easy for people to move from less central areas to central locations as prices rise exponentially in mature estates.
Perhaps I should go and check out the latest resale prices in Clementi and do an analysis about it soon.
Inflation is ridiculous, buy now than later!
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