Why Bto Supply Not Curbs Key Cooling Hdb Resale Prices
The Singapore government has implemented several measures to control the demand for HDB resale flats, but prices have continued to rise by more than 50% since the 2Q2019 low. This highlights a fundamental problem: demand-side interventions can only do so much when the supply fails to meet the housing needs.
While the government has tightened the loan-to-value ratio for HDB loans on three occasions since 2021, these measures have only caused a temporary delay in purchasing. This is because the demand for resale flats serves a critical housing need, and buyers will eventually return once they are eligible. As a result, prices have continued to increase.
On the other hand, the government has responded to the supply shortage by increasing the launch of Build-To-Order (BTO) and Sale of Balance Flats (SBF) units. These flats, offered directly by HDB, are more affordable than resale flats and can help absorb demand. Historical data supports this, as a record number of BTO bookings in FY2011 led to a slowdown in resale price growth.
However, the supply of BTO flats has been inconsistent in recent years, as HDB scaled back its BTO supply from FY2015 to FY2018. This resulted in a surge in resale prices in FY2019, as buyers turned to the resale market due to limited BTO supply.
The Covid-19 pandemic further exacerbated the supply shortage, leading to a surge in homebuying activity. Despite efforts to increase BTO supply, resale prices continued to rise, as the supply could not keep up with the demand.
The evidence suggests that a sustained booking volume of over 21,000 BTO flats annually is necessary to moderate resale price growth. This translates to a launch volume of 23,000 to 25,000 flats per year, a target that HDB has not consistently achieved in recent years.
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There is also a weak correlation between the availability of Sale of Balance Flats and the decline in resale prices. This may be due to the limited availability of flats in specific areas, lower ballot success rates, and restrictions under the Ethnic Integration Policy (EIP).
On the other hand, the relationship between BTO bookings and resale prices is more apparent. A high volume of BTO bookings has consistently led to price moderation, while a dip in BTO bookings has resulted in an increase in resale prices. A two-year lag between newly MOP flats and resale prices also suggests that a surge in MOP-flat supply may lift resale prices one to two years down the line.
In conclusion, the key to controlling HDB resale prices is to increase the supply of BTO flats consistently. While the oversupply of BTO flats may have short-term effects on resale prices, it could lead to higher prices in the long run when these flats re-enter the market post-MOP. Therefore, a balancing act is needed to ensure public housing affordability while maintaining demand for executive condominiums and private housing. Ultimately, the answer lies in building more and building consistently.