In an era of whiz kids, Millennials and twenty-something Internet millionaires, maturity often gets short-changed. Not so in HDB property.
Mature HDB estates have outperformed youthful estates during the Cooling Measures.
Both types of estates have lost market value since the peak of the HDB market. However, the impact on homeowners in non-mature flats has been far more severe.
According to SRX Property, HDB estates have lost an estimated total of $6.6 billion in market value, as measured by the X-ValueTM, since April 2013.
The market value for non-mature estates has declined about $4.4 billion.
This translates to an average loss of $58,371 per flat for homeowners.
In contrast, mature estates have experienced a $2.2 billion decline in market value.
This means homeowners in mature HDB estates have lost an average $40,708 per flat or about $18,000 less than their counterparts in non-mature estates.
Typically, mature estates are better at weathering Cooling Measures and other external shocks (i.e., a financial crisis) because their fundamentals are well-established.
Mature estates tend to be located in areas that are well-developed with easy access to public transportation, established shopping areas, and mature neighborhoods with parks, popular schools, and other amenities.
In other words, they are like a blue chip stock or an experienced manager. They are predictable and stable.
Non-mature estates, however, are located in new areas in which the surrounding infrastructure is still developing. There hasn’t been enough time for their neighborhoods to establish a track record of predictability and stability. In the case of brand new estates, we don’t know how they will react to different economic conditions.
In addition, when the government introduces built-to-orders, they are usually located near non-mature estates. More supply means more competition in the resale market and prices decline faster.
Is all hope lost for the younger generation?
Of course not. Eventually they will grow up, mature, and settle into similar patterns as the older estates.
But, in the short run, the data shows that non-mature estates are more vulnerable to Cooling Measures and other shocks to the market.
For more information, on the numbers used in this article, see SRX Research.