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Do You Know the 19 Common Factors that Affect HDB Flat Prices?


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Common Factors that Affect HDB Flat Price


Introduction

While nobody can ascertain the price of your flat, certain elements that your flat possesses may result in the flat commanding a higher price than the others. This is where the merits of valuation comes in to prevent disputes. However, some elements of a flat do have an absolute advantage over the other. We will look at the 19 common factors that can affect the value of your flat!


#1 Demand Factors

Factors that affect the willingness and ability to buy a flat could have an impact on demand and market price of a flat. There are micro and macro factors that affect the demand of the flats. For example, poor condition of a flat can reduce the willingness of people to buy and it is a micro factor. Policies that make a flat harder to buy will reduce the ability of people to buy and it is a macro factor.


#2 Environment

The better the environment, the higher price it is worth. “Better” is a very subjective term. To some buyers, better environment means a quiet environment. On the other hand, some buyers think that a bustling environment is a better environment.


#3 Facilities

The more variety and comprehensive the facilities are, the higher price the flat can command because this brings about convenience to the owner.


#4 Layout and #5 Shape

A regular-shaped layout or shape is preferred by more people as compared to triangular layout or odd-shaped layout. This is because our furniture are usually regular-shaped and it fits a regular-shaped layout flat.


#6 Design, #7 Renovation, #8 State of Repair and Condition

A flat with nice design, better renovation, better state of repair and condition of unit can command a higher price. Although buyers taste and preference on design may be different, we can all agree that a flat with nice design is always better than those without design work or those flats that are run-down. Furthermore, a nice design comes at a higher cost for the owner, naturally the value of the flat is also higher.


#9 Tenure and Age of Flats

In a normal scenario, a flat with a longer tenure or shorter age will worth much more, just like cars or any product with depreciating value. Resale flats are generally more expensive than BTO flats because BTO flats are heavily subsidized public housing flats. Secondly, the previous owner may want to sell at a high price to make more profit, resulting in the much higher prices of resale flats.


#10 Fengshui, People Beliefs and Religious Beliefs

Fengshui and people beliefs can be very subjective. Different people find different flats good for their lives. However, Chinese are more involved in fengshui. We find that age does not matter because young couples have different religious beliefs too. Having that in mind, most people do not prefer flats that are directly opposite a religious building, columbarium, cemetery, hospital as they are believed to either have “negative energy” or it clashes with their religious beliefs. Unit number with a #4 is also not popular among buyers.


#11 Size

A bigger flat is obviously worth more than a smaller flat due to the usable size. A 5 room flat should always worth more than a 4 room flat if every other variable is held constant.


#12 Accessibility

Better accessibility brings about great convenience to the residents and flats that are easily accessible would naturally worth more.


#13 Height and View of Units

Higher floor units are worth more than lower floor units in the same block and same stack. Sellers should not price higher than other sellers living above them (assuming flat with same size and attributes) because as a buyer, I would go for the higher floor unit with a better view.


#14 Economic Obsolescence

Changes in the environment can also change the value of your flat. If the government announces the building of a MRT station, hospital or a park beside your flat, the value will change accordingly too. It need not be built yet, but a change in the Master Plan zoning is enough to start changing the value of your flat.


#15 Functional Obsolescence

Some flats are also worth less because of its outdated or poor design. For example, separated heaters for both bathrooms, or only one bathroom in a big flat, has poor demand, resulting in a lower price.


#16 Cooling Measures

Political influence is one of the most obvious reasons for the movements in real estate market. Cooling measures like Additional Buyer Stamp Duty (ABSD for PR household), Total Debt Servicing Ratio (TDSR) etc reduce the ability of buyers to buy flats, hence lowering the demand and number of buyers. A lower demand results in a lower price of your flat. An influx of PRs can lead to a higher demand of your flat later as there is a bigger pool of buyers. The policies of the government can affect the worth of your flat.


#17 Economic Indicators and Market Trend

Several economic indicators can also affect the worth of your flat. If you can read the market trend, it will also help too. Slow or negative economic growth, higher unemployment rates, higher inflation rates, lower spendings etc reduces the ability to buy, hence lowering the demand and value of your flat.


#18 Supply of Flats

Changes in the supply of the flat can change the price of the flat too. Furthermore, the supply is price inelastic in the short run, a higher price will not cause HDB or developers to build more houses in a short time, causing supply to be quite stable.

When the supply of flat is low, the value of your flat will be higher because the pool of flats is less and there are less choices in the market. This is assuming that all other factors are not changing. Low supply of flats occur when there are not many people selling their resale flats (sellers’ market). It also occurs when BTO flats are not enough for the market.


#19 Cheap Flats

If your flat does not have any of the attributes, it does not mean that your flat is not attractive, it just have to be priced right to be attractive. There is a pool of buyers who only want cheap houses, and they may not need the attributes that we discussed. Sellers of this type of flats need to be realistic and price it lower.



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Common Factors that Affect HDB Flat Price


Introduction

While nobody can ascertain the price of your flat, certain elements that your flat possesses may result in the flat commanding a higher price than the others. The closest way to find out how much your flat is worth is by a certified valuer. Please take note that we used the word “closest”. Professional valuers have a systematic way of determining the price of the flat based on a set of criterias. However, different professional valuers have different set of systems and criteria. Even among professional valuers, the value will be different. However, we should still use their services because it is the closest and the most reliable way of finding out your flat price. Furthermore, mortgagees and CPF board uses the work of professional valuers to determine how much loan and CPF to be released respectively. Using the services of professional valuers come with a price. Please note that for HDB transactions, the HDB valuer will be the official one.


Demand Factors

Factors that affect the willingness and ability to buy a flat could have an impact on demand and market price of a flat. A higher demand will result in a higher price. However, we hold the assumption that only one variable changes at a time. Factors that only affect your flat are micro factors, while factors that affect all other similar flats are macro factors. For example, poor condition of a flat can reduce the willingness of people to buy and it is a micro factor. Policies that make a flat harder to buy will reduce the ability of people to buy and it is a macro factor.


Environment

The better the environment, the higher price it is worth. “Better” is a very subjective term. To some buyers, better environment means a quiet environment. On the other hand, some buyers think that a bustling environment is a better environment.


Facilities

The more variety and comprehensive the facilities are, the higher price the flat can command because this brings about convenience to the owner.


Layout and Shape

A regular-shaped layout or shape is preferred by more people as compared to triangular layout or odd-shaped layout. This is because our furniture are usually regular-shaped and it fits a regular-shaped layout flat.


Design, Renovation, State of Repair and Condition

A flat with nice design, better renovation, better state of repair and condition of unit can command a higher price. Although buyers taste and preference on design may be different, we can all agree that a flat with nice design is always better than those without design work or those flats that are run-down. Furthermore, a nice design comes at a higher cost for the owner, naturally the value of the flat is also higher.


Tenure and Age of Flats

In a normal scenario, a flat with a longer tenure or shorter age will worth much more, just like cars or any product with depreciating value. However, in Singapore real estate market, there is an unique buyer behaviour. Resale flats are worth much more and those that are old (especially over 60 years old) are also worth much more. These behaviours are not normal and may not be good. Resale flats (whether subsidized or unsubsidized) are still more expensive than BTO flats because BTO flats are heavily subsidized public housing flats. Secondly, a resale transaction is a C2C (consumer to consumer) transaction. Traditional B2B or B2C concepts do not work. The previous owner want to sell at a high price to make more profit, resulting in the much higher prices of resale flats. The abnormal behaviour of much older flats that are worth much more is also very bad. It is a speculative behaviour that old flats will be en-bloc and the government will compensate with new flats via SERS. While it has a higher chance for en-bloc as compared to new flats, there is an equally high chance that en-bloc may not occur and the value may just drop to zero when 99 years is up. Furthermore, selling a very old flat after realising there is no en-bloc will be extremely difficult because everybody knows there is no longer any profitable potential. Especially when the surroundings are old flats, en-bloc may not occur in our opinion because the government is unable to relocate everybody in the area to a temporary or new housing in a short time. We do not recommend buyers to speculate on en-bloc potential to over-inflate the price of a flat based on the normal behaviour. It is like a bubble of a single stock counter whose market price is much higher than what it is actually worth.


Fengshui, People Beliefs and Religious Beliefs

Fengshui and people beliefs can be very subjective. Different people find different flats good for their lives. However, Chinese are more involved in fengshui. We find that age does not matter because young couples have different religious beliefs too. Having that in mind, most people do not prefer flats that are directly opposite a religious building, columbarium, cemetery, hospital as they are believed to either have “negative energy” or it clashes with their religious beliefs. Unit number with a #4 is also not popular among buyers.


Size

A bigger flat is obviously worth more than a smaller flat due to the usable size. A 5 room flat should always worth more than a 4 room flat if every other variable is held constant.


Accessibility

Better accessibility brings about great convenience to the residents and flats that are easily accessible would naturally worth more.


Height and View of Units

Higher floor units are worth more than lower floor units in the same block and same stack. Sellers should not price higher than other sellers living above them (assuming flat with same size and attributes) because as a buyer, I would go for the higher floor unit with a better view.


Economic Obsolescence

Changes in the environment can also change the value of your flat. If the government announces the building of a MRT station, hospital or a park beside your flat, the value will change accordingly too. It need not be built yet, but a change in the Master Plan zoning is enough to start changing the value of your flat.


Functional Obsolescence

Some flats are also worth less because of its outdated or poor design. For example, separated heaters for both bathrooms, or only one bathroom in a big flat, has poor demand, resulting in a lower price.


Cooling Measures

Political influence is one of the most obvious reasons for the movements in real estate market. Cooling measures like Additional Buyer Stamp Duty (ABSD for PR household), Total Debt Servicing Ratio (TDSR) etc reduce the ability of buyers to buy flats, hence lowering the demand and number of buyers. A lower demand results in a lower price of your flat. An influx of PRs can lead to a higher demand of your flat later as there is a bigger pool of buyers. The policies of the government can affect the worth of your flat.


Economic Indicators and Market Trend

Several economic indicators can also affect the worth of your flat. If you can read the market trend, it will also help too. Slow or negative economic growth, higher unemployment rates, higher inflation rates, lower spendings etc reduces the ability to buy, hence lowering the demand and value of your flat. However, these indicators have many other factors to consider like timeframe of the indicators. Therefore it is better to leave it to the professional valuer to do the job.


Supply of Flats

Reduction in supply can increase the worth of your flat and increase in supply of flats will reduce the worth of your flats. Furthermore, the supply is price inelastic in the short run, a higher price will not cause HDB or developers to build more houses in a short time, causing supply to be quite stable.

When the supply of flat is low, the value of your flat will be higher because the pool of flats is less and there are less choices in the market. This is assuming that all other factors are not changing. Low supply of flats occur when there are not many people selling their resale flats (sellers’ market). It also occurs when BTO flats are not enough for the market.


Cheap Flats

If your flat does not have any of the attributes, it does not mean that your flat is not attractive, it just have to be priced right to be attractive. There is a pool of buyers who only want cheap houses, and they may not need the attributes that we discussed. Sellers of this type of flats need to be realistic and price it lower.


Conclusion

Below is a summary of what we have discussed for your reference.

Try to look out for these value factors for client (mostly demand factors)


  • Supply of buildings and land (inelastic in the short run)
  • Environment (micro factor)
  • Facilities (micro factor)
  • Layout (micro factor)
  • Design (micro factor)
  • Age of flats (micro factor)
  • People beliefs, fengshui (micro factor)
  • Condition of units and renovation (micro factor)
  • Location (micro factor)
  • Shape of unit (micro factor)
  • Size of unit (micro factor)
  • Accessibility (micro factor)
  • Height and view of units (micro factor)
  • Economic obsolescence
  • Functional obsolescence
  • Cooling measures (political)
  • Economic indicators (economic)
  • Market trend (economic)
  • State of repair


Date first posted on 18 June 2019; Last Edited on 18 June 2019

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