A property bull run usually occurs when the demand for property is much higher than the property supply. The question is, are we actually experiencing the beginnings of a bull run?
The first quarter of 2021 saw the eighth consecutive quarterly decline in the unsold new private residential supply. Prior to the last en bloc cycle in 2017-18, the same pattern had been observed, with the private property supply having fallen to around 15,000 units.
In 2017, the then-National Development Minister Mr Lawrence Wong had highlighted that property buyers ought to take into account the lease balance for HDB flats, as not every flat would be selected for the Selective En bloc Redevelopment Scheme (Sers). Since 1995 to 2017, only 4% of HDB flats were selected for Sers. This seems to have caused a shift in the public perception of HDB flats as a long-term investment asset, with home investors turning to private properties as a means of growing their wealth. Furthermore, condominium owners can also band together, forming a sales committee to call for en bloc. As such, they would have greater control and a more active role in jointly selling the land. For HDB homeowners, the decision on the selection of HDB flats for Sers, lies solely in the hands of HDB.
More than a symbol of a lifestyle that homeowners hope to attain, private properties generally generate a greater capital appreciation (in absolute dollars), in comparison to HDB resale flats. In the period from 2014 to 2020, the private home price growth of 6.8% lagged behind the economic growth of 10.4%. Similarly, private home price growth lagged behind the household net worth growth, M2 monthly supply (cash deposits, checking deposits, saving deposits, money market securities, and other time deposits), and CPF balance increase, for the same period.
The imminent completion of the minimum occupation period (MOP) for some HDB flats and executive condominiums, would likely result in an increase in the number of people upgrading to new launches or resale condominiums. This would cause the property supply to dwindle further, and in turn, lead to increase in property prices. Not sure about how you can navigate the property market? Head over to www.assetprogressionleader.com for more information on entering the market.