Understanding HDB Depreciation Curve | HDB Resale Market
Many of us may think that buying an HDB flat is a full-proof investment – we have seen huge profits being made through the selling of HDB flats in the past.
But, we have to be aware that Singapore has been growing well economically over the years and it is certainly unrealistic to continue thinking that in today’s market, we can still assume similar outcomes since HDB overall prices have pretty much peaked.
Not to mention the cooling measures that the Singapore government has introduced to make HDB flats more affordable.
Today, we are dedicating our time to find out about HDB flat’s depreciation curve – the decreased in value as the asset ages over time.
Having used Rick to help me sell an apartment in the past, I had no hesitation in turning to him as my husband and I began to look for a new home. Rick was able to help us navigate the market as we came to terms with what our budget and chosen geographic area had to offer. As we narrowed our criteria Rick was able to direct us to apartments that fit our needs and then proved a superior negotiator in helping us get a great deal once we had made an offer. His guidance throughout the process was invaluable and he was always available to answer questions and help with the followup as we negotiated finances, legal terms and liaised with HDB. If I was ever to need the services of a realtor again I would not hesitate to call Rick and know that I could comfortably rely on his professionalism and efficiency to capably see me through either a purchase or a sale of my property.
Anthony & Sara
Buyer - Blk 293 Yishun
Table of Contents
What is the HDB Resale Price Index?
The above HDB resale price index charts the overall price movements of HDB resale flats and it is calculated based on HDB resale transactions registered across towns, flat types and models.
Q: Why should we look at the HDB resale price index?
The HDB resale price index will give us an estimate of how much our home is worth.
The majority of us, lives in HDB flats and at some point in our life, we will be looking at switching home(s) – be it changes in our lifestyle towards better quality of living, upgrading due to your expanding family, relocation to a desired location near your children’s school or even downsizing to obtain cash on hand.
Therefore, we will need to assess our HDB carefully.
Understanding the HDB resale price index is important so that we can plan ahead and make informed decisions by familiarizing ourselves with the trends and pinpoint our preferred timing to sell our asset, to maximize its potential profits.
HDB depreciation curve
If you refer to the price index chart above, you will notice that it is not a one-way upwards trend and the index shows a downward trend in HDB prices since 2013.
Let’s look at some of the reasons and try to understand what causes the depreciation curve.
Singapore Cooling Measures
We briefly mention this in the beginning and do note that the swerve is resulted from the first wave of cooling measures that kicked in on 12 January 2013.
It played a big part in the alteration of Singapore’s property prices and the cooling measures imposed are:
- Additional Buyer Stamp Duty (ABSD);
ABSD will be raised between 5 and 7 percentage points across the board and it will be imposed on Permanent Residents purchasing their 1st residential property and on Singaporeans purchasing their 2nd residential property.
- Tightened Loan-To-Value (LTV) limits from financial institutions for individuals and companies who already have at least one outstanding loan
- The minimum cash down payment was raised from 10% to 25% for individuals applying for a second or subsequent housing loan
- Introduction of Mortgage Servicing Ratio (MSR) for housing loans
- PRs who own a HDB flat will not be allowed from subletting their whole flat.
- PRs must sell their Hdb flat within six months of purchasing a private residential property in Singapore.
See full cooling measures.
After the cooling measures were introduced, property prices started to show obvious adjustments.
HDB resale flat prices was adjusted as well.
This adjustment was further reinforced by another round of cooling measures that took effect on 6 July 2018.
- ABSD rates for Singapore Citizens and Singapore Permanent Residents purchasing their first residential property was retained at 0% and 5% respectively
- ABSD rates was raised by 5%-points for all other individuals and 10%-points for entities
- Another non-remittable ABSD of 5% was introduced for developers purchasing residential properties for housing development
- Tightened Loan-To-Value (LTV) limits for all housing loans from financial institutions
See full cooling measures.
Cash Over Valuation (COV)
In the HDB resale market, buyers and sellers are free to negotiate with one another before deciding on the final selling price, and Cash Over Valuation (COV) is the extra money that buyers have to pay in addition to the valuation of the property during HDB resale transactions.
E.g. The selling price of a HDB flat is $520,000, and the valuation is only $500,000. Buyers can only loan up to 90 percent using HDB loan of $500,000. The $20,000 above the valuation is referred to as Cash Over Valuation and has to be paid in cash.
This is because banks and HDB decides the loan amount according to market valuation instead of the HDB’s selling price.
Prior to 2014, COV on resale flats were treated as a given, most resale flats were sold above its valuation.
It was a price negotiation tool to maximize a seller’s profit – one of the reasons why HDB resale flat prices increased exponentially back then.
Removing Cash Over Valuation (COV)
In 2014, HDB announced that they will be removing the COV to make HDB flats more affordable.
Hence, HDB declared that, they will no longer publish COV prices, and buyers will have to submit requests for valuation, only after agreeing on the price with the seller.
This means that, if you agree on a price that’s too high, you could end up having to pay more in cash (as the home loan and your CPF cannot be used to pay for COV).
This in turn, created a sentiment of fear in most buyers that they will be paying a great deal in cash beyond its valuation.
Consequently, HDB prices were moderated downwards.
By around 2016, more than 80% of HDB resale flats were sold with ZERO COV and in today’s market, buying without COV has largely become the norm – this has been a significant contributor in keeping prices of resale flats low.
Whilst this regulation is good news for new home buyers, the impact on sellers is negative.
The opportunity for sellers to sell their flats at high COV has become very slim.
My husband and I started our home-search by ourselves but was met with issues soon enough as we were unsure of the important things and areas to look out for and we were also not experienced in the negotiation process with the seller’s representing agent. Soon after hearing our problems, I was introduced to Rick by a friend. The entire buying process quickly became swift and smooth; Rick understands our needs, puts our personal interest first, seals us a good deal and educated us along the way about the important things and areas to pay attention to. Thumbs up to Rick and we will recommend him to anyone for their home-search
Jo & Jeffery
Buyer - Blk 452a Sengkang
HDB balance lease
For many years, Singaporeans wondered what would happen when their HDB 99 year lease is up.
A common hope or assumption was that HDB flats owners will be offered something similar to Selective En-bloc Redevelopment Scheme (SERS).
This is a particularly desirable event since SERS gives you a brand new HDB flat that not only replaces your old flat, it tops up your lease to a fresh 99-year, as well as a generous compensation to follow suit.
However, worries began rising toward 2017 when the government warned against buying old flats – they reminded Singaporeans that only about 4% of older flats would qualify for SERS.
Even so, many still held high hopes that they will be offered something equally as generous as SERS.
In 2018, at a figurative hammer of the gavel, came the announcement of the Voluntary Early Redevelopment Scheme (VERS). When a HDB flat is 70 years old or older and their precinct is selected for VERS, owners can vote for the Government to buy back their homes before their leases runs out.
However, the compensation is likely to be less than SERS.
This is a relatively new exercise and we might need to wait another 20 years before we can chart VERS cycle, but it is unlikely that these old HDB flats will be worth much at “market value”.
Here’s a look at how the prices of flats with 40 – 60 years of lease remaining have been moving:
As you can see, prices of older HDB flats are inclined to depreciate.
HDB supply and demand
Finally, there was also a significant boost in supply and shorter waiting time for Build-To-Order (BTO) flats in certain housing estates.
The Re-offer of Balance was also introduced – pooling flats that remain unsold at the conclusion of previous Sale Of Balance exercise.
As it does not require applicants to indicate their preferred flat type and town/estate during the application, applicants are able to have a wider selection of housing.
Hand-in-hand with larger grants and raised income ceilings for new flats, all these factors cushion the demand in HDB resale market.
Questions to ask yourself
Have you check if your flat have started to depreciate?
Are you familiar with the latest marketing trends?
Have you worked out the pros and cons of keeping your hdb?
Will you be interested to upgrade or down-size if no cash is needed?
Conclusion
Trends are never a straight line up or down; trends consists of upwards and downwards curve in cycles.
Factors such as the location, future potential developments, time of purchase and dynamics of the unit are also strong indicators that determines the selling price.
If you are currently staying in a HDB flat and you are looking out for the right time to sell your HDB, understanding HDBs trends and depreciation curve will helps you to plan ahead – having the right knowledge will enhance your opportunity to your make the best returns.
Moreover, your home, is one of your biggest assets; it is wise to make sure your long-term plans and finances are formulated, and that you are making informed decisions, from your 1st home.
At YouHome.sg, I have successfully helped many clients make deliberate progressions throughout the years of their home planning.
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Self Introduction
Hi, I’m Rick Long
With decades of experience in Singapore’s real estate market, I’ve had the privilege of being mentioned in media outlets such as Channel NewsAsia, The Straits Times, and 99.co.
Over the years, I’ve written extensively on the local property landscape — tackling the real questions buyers and sellers face, and helping them navigate each step with greater clarity and confidence.
Many of my clients have become long-time friends — their trust and kind reviews continue to inspire me to raise the bar in everything I do.
I believe real estate should be strategic, seamless, and deeply aligned with your life’s journey.
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