Will we see million dollar HDB flats in non-mature estates soon?
Amid the backdrop of rising HDB prices, one fact has begun to stand out: resale flats in non-mature estates have to narrow the gap. One of the transaction records for non-mature flats, in March 2021 was in Punggol; this was when a five-room flat sold for $910,000. In fact, there have been 41 transactions in non-mature estates this year, that have gone beyond $800,000. Heres a look at whats going on:  Town Flat Type Size Model Lease Commenced Price Punggol Five room 147 Premium Apartment Loft 2012 $910,000 Hougang Executive 138 Apartment 1997 $892,888 Choa Chu Kang Executive 182 Premium Maisonette 1998 $890,000 Hougang Executive 135 Apartment 1997 $888,000 Hougang Executive 146 Maisonette 1992 $885,000 Bukit Batok Executive 165 Maisonette 1997 $880,000 Hougang Executive 156 Maisonette 1992 $880,000 Bukit Batok Executive 165 Maisonette 1997 $878,000 Hougang Executive 148 Maisonette 1992 $868,000 Jurong East Executive 145 Maisonette 1998 $868,000 Yishun Executive 181 Apartment 1992 $868,000 Hougang Executive 135 Apartment 1997 $865,000 Yishun Multi-Generation 179 Multi Generation 1987 $860,000 Yishun Multi-Generation 171 Multi Generation 1987 $860,000 Hougang Five room 112 DBSS 2014 $860,000 Bukit Panjang Executive 125 Premium Apartment 2003 $858,888 Jurong East Executive 145 Maisonette 1998 $850,000 Hougang Executive 147 Maisonette 1992 $850,000 Bukit Panjang Executive 142 Maisonette 1999 $850,000 Bukit Batok Executive 149 Apartment 1995 $838,888 Woodlands Executive 174 Apartment 1995 $835,000 Jurong East Executive 143 Apartment 1998 $832,000 Jurong East Executive 142 Maisonette 2000 $830,000 Jurong East Executive 145 Maisonette 1998 $828,000 Yishun Executive 164 Apartment 1992 $828,000 Jurong East Executive 142 Maisonette 2000 $826,000 Bukit Panjang Executive 131 Apartment 2002 $825,889 Jurong East Executive 141 Maisonette 2000 $825,100 Woodlands Executive 189 Apartment 1994 $822,888 Hougang Executive 141 Apartment 1999 $822,000 Woodlands Executive 189 Apartment 1994 $818,000 Woodlands Executive 189 Apartment 1994 $818,000 Hougang Five room 142 Model A-Maisonette 1984 $817,000 Jurong East Executive 144 Apartment 1998 $815,000 Woodlands Executive 179 Apartment 1995 $810,000 Woodlands Executive 179 Apartment 1994 $810,000 Hougang Five room 115 Premium Apartment 2016 $810,000 Hougang Executive 142 Apartment 1997 $810,000 Woodlands Executive 189 Apartment 1994 $810,000 Hougang Executive 150 Maisonette 1984 $805,000 Hougang Executive 145 Maisonette 1988 $805,000  The price gap between mature and non-mature estates  To get a sense of the price gap, we compared average flat prices in mature estates versus non-mature ones. We compared prices between Q1 2016, and Q1 2021. The mature estates comprised:  Ang Mo Kio  Bedok  Bishan  Bukit Merah  Bukit Timah  Central Area  Clementi  Geylang  Kallang / Whampoa  Marine Parade  Pasir Ris  Queenstown  Serangoon  Tampines  Toa Payoh  The non-mature estates were:  Bukit Batok  Bukit Panjang  Choa Chu Kang  Hougang  Jurong East  Jurong West  Punggol  Sembawang  Sengkang  Tengah (Note that Tengah has been omitted, as its a new town and theres no transaction data)  Woodlands  Yishun  Overall gap in price per square foot  In Q1 2016, the average price for flat price (all sizes) was $482 psf in mature towns, and $376 psf in non-mature towns; a gap of about 28.1 per cent. By Q1 2021, the average flat price for mature towns was at $516 psf, whereas non-mature towns averaged $427 psf. This is a gap of about 20.8 per cent, so non-mature estates have caught up. Price gap for three-room flats:  PHOTO: URA, Realis and 99.co  Three-room flats in mature estates averaged $465 in Q1 2016, while non-mature counterparts averaged $394 psf. This was a gap of about 18.1 per cent. As of Q1 2021, three-rooom flats in mature estates averaged $472 psf, while non-mature counterparts averaged $437 psf. This is a gap of about eight per cent. Price gap for four-room flats:  PHOTO: URA, Realis and 99.co  4-room flats in mature estates averaged $497 in Q1 2016, while non-mature counterparts averaged $377 psf. This was a gap of about 32 per cent. As of Q1 2021, three-rooom flats in mature estates averaged $546 psf, while non-mature counterparts averaged $429 psf. This is a gap of about 27.3 per cent. Price gap for five-room flats:  PHOTO: URA, Realis and 99.co  Five-room flats in mature estates averaged $496 in Q1 2016, while non-mature counterparts averaged $362 psf. This was a gap of about 37 per cent. As of Q1 2021, three-rooom flats in mature estates averaged $539 psf, while non-mature counterparts averaged $419 psf. This is a gap of about 28.6 per cent. Again, that gap between non-mature and mature estates has closed up. Speaking to realtors on the ground, the common consensus was that  although flat prices everywhere have been rising  its non-mature estates that have gained the most. One of them explained that:  Its not surprising there are, yet again, more million-dollar flats in Queenstown and Pinnacle at Duxton and so forth. What is surprising is that, in the past 30 years, there have only been about 15 (resale flat) transactions in non-mature towns that have reached a quantum of $900,000.Five of these were between 2019 and 2021, which is also about the same time were seeing (resale) flats recover from seven years of declining prices. So the past year and a half has been a defining moment for non-mature towns. Some of the key reasons are:  Ongoing decentralisation  Improved public transport infrastructure  Covid-19 construction delays  An asset-progression mindset  1. Ongoing decentralisation  PHOTO: Stackedhomes  Punggol is benefitting from the upcoming Punggol Digital District , which will bring schools, offices, and new retail / entertainment to the area. Woodlands has its own counterpart, the Woodlands North Corridor, which will transform it into a new regional centre. Jurong East, meanwhile, is often seen as being non-mature in name only; the transformation of the Jurong Lake District has made it the retail powerhouse of Singapores west-end, with malls like Jem and JCube. As Singapore continues to decentralise , living near the traditional CBD becomes less meaningful. As such, well see increased demand for homes  or even potential rental assets  in the fringe regions of Singapore. Home buyers and investors focused on the long term have a good reason to consider areas like Woodlands and Sembawang now; buying and moving in while prices are still low. 2. Improved public transport infrastructure  PHOTO: Stackedhomes  The mature / non-mature estate divide was stark in the 1990s, when the MRT network had only the North  South and East  West lines. The LRT didnt exist till 1999. In those days, large swathes of non-mature estates were cut off from the train network, so home buyers were willing to pay larger premiums for rail access. Today however, most neighbourhoods have multiple MRT stations. Areas that arent directly connected to the MRT network are also supplemented by the LRT, such that the mature / non-mature divide has diminished. Coupled with the creation of new business hubs (see point 1), flats in non-mature areas are no longer as inconvenient as they used to be. (Except maybe for Tengah, which is the newest and still has a long way to go. Sorry, Tengah residents). ALSO READ: HDB BTO November 2020 launch in non-mature estates  Sembawang and Tengah  3. Covid-19 construction delays  PHOTO: Stackedhomes  Its not a coincidence that the spike in resale flat demand happened toward the height of the pandemic. Even as we write this, 85 per cent of BTO developments are facing construction delays of six to nine months. This is due to shortages in supply and labour, which means the interior design industry isnt spared either. The delays in build time plus renovation could mean up to another year, for some home buyers. Also keep in mind that the Minimum Occupancy Period (MOP) of five years starts from key collection, not from the time the flat is bought. As such, those buying a BTO flat might end up waiting as long as eight or nine years before they can sell. This long delay is driving some buyers to switch from the BTO market to the resale market. 4. An asset progression mindset  PHOTO: Stackedhomes  Realtors told us that many buyers still see their first flat as a stepping stone, toward eventual private property ownership. These buyers tend to favour resale flats, despite the higher price tag. The main reason is the long delays before they can sell (see above). Buyers intent on asset progression often worry about rising private property prices, which historically appreciate faster than resale flat prices. However, these buyers also tend more toward cheaper flats in non-mature areas. Apart from having greater room for appreciation, these buyers dont mind having fewer amenities  after all, theyre intending to stay for only around five years (after which the area will hopefully be more built up, and they can net a nice return). For home buyers in 2021, this means a higher chance of having to pay Cash Over Valuation (COV), even for flats in non-mature areas  The COV refers to the amount paid over the flats actual valuation (e.g., if the selling price is $400,000 while the valuation is $380,000, the COV is $20,000). COV had been almost extinct after 2013, with measures taken to drive it down  this is why COV prices are no longer revealed by HDB. However, realtors on the ground inform us that COV has been creeping back onto the property scene; and without available data, theres no real way to tell how high its climbed. As COV is not covered by the home loan, resale flat buyers today should be prepared to save up. Even with a 90 per cent HDB loan, you may have to pay anywhere from $10,000 to $30,000 on top of your down payment. This article was first published in Stackedhomes.