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19-02-2013, 02:41 PM
Here are some data which I think reflects some underlying trends in the HDB resale market.
This series is the total number of HDB flats approved for sub-letting at the end of the particular quarter. By definition the flat must at least fulfill MOP, and the owners are theoretically able to upgrade to private property in this period
4Q2007 17,400
4Q2008 22,200
4Q2009 24,300
4Q2010 35,000
4Q2011 40,000
4Q2012 43,508
The numbers have been going up every year. There are a few things happening here
- older couples move in with children and sub-let their own flats
- increased emigration where families leave and sub-let their vacant flats
- HDB owners move to private properties and did not sell, instead letting out their existing flats
The last point may provide some hints on how durable the cashflows underpinning some of the private property leverage out there.
Resale transactions are less predictable, but the number suggests that it is indeed running below historical levels, more so when you adjust for the larger housing stock today. While the high BTO supply is certainly one of the main reasons for the decline, when viewed together with the rental statistics, there appears to be another trend at play.
Instead of the flats hitting the market as resale, people choose to retain their HDBs upon upgrading to private property. With cheap interest rates, you can carry a 1.5 to 2 mil loan with susbstantial support from the rentals of the HDB unit, instead of selling it to extract capital and reduce overall leverage.
Total resale transactions per year
2007 29,436
2008 28,419
2009 37,205
2010 32,257
2011 24,633
2012 25,094
Bottom line is I think there is a substantial number of households in Singapore doing this "carry trade" now, which will last until
1) immigration slows down by a lot
2) new private housing supply hitting the market (late 2013 onwards)
3) interest rates rise
If all 3 takes place at the same time, HDB prices might come under pressure to decline quickly if these owners are forced to deleverage, even if the local economy remains ok.
This series is the total number of HDB flats approved for sub-letting at the end of the particular quarter. By definition the flat must at least fulfill MOP, and the owners are theoretically able to upgrade to private property in this period
4Q2007 17,400
4Q2008 22,200
4Q2009 24,300
4Q2010 35,000
4Q2011 40,000
4Q2012 43,508
The numbers have been going up every year. There are a few things happening here
- older couples move in with children and sub-let their own flats
- increased emigration where families leave and sub-let their vacant flats
- HDB owners move to private properties and did not sell, instead letting out their existing flats
The last point may provide some hints on how durable the cashflows underpinning some of the private property leverage out there.
Resale transactions are less predictable, but the number suggests that it is indeed running below historical levels, more so when you adjust for the larger housing stock today. While the high BTO supply is certainly one of the main reasons for the decline, when viewed together with the rental statistics, there appears to be another trend at play.
Instead of the flats hitting the market as resale, people choose to retain their HDBs upon upgrading to private property. With cheap interest rates, you can carry a 1.5 to 2 mil loan with susbstantial support from the rentals of the HDB unit, instead of selling it to extract capital and reduce overall leverage.
Total resale transactions per year
2007 29,436
2008 28,419
2009 37,205
2010 32,257
2011 24,633
2012 25,094
Bottom line is I think there is a substantial number of households in Singapore doing this "carry trade" now, which will last until
1) immigration slows down by a lot
2) new private housing supply hitting the market (late 2013 onwards)
3) interest rates rise
If all 3 takes place at the same time, HDB prices might come under pressure to decline quickly if these owners are forced to deleverage, even if the local economy remains ok.
