More Million-Dollar HDBs

These transactions are heavily concentrated in centrally located towns like the Central Area, Queenstown, Bukit Merah, Toa Payoh, and Kallang/Whampoa, but the ripple effect is undeniable. As price benchmarks are relentlessly pushed higher in these areas, it creates a cascading wave of rising valuations across the island. For aspiring upgraders or young families hoping to live near their parents in these established neighbourhoods, the financial barrier to entry has morphed into a seemingly insurmountable wall, pushing them further to the fringes or into smaller homes than they had planned for.

This normalisation of the million-dollar HDB flat fundamentally alters the personal finance calculus for thousands of households. It fuels asset appreciation for existing owners but simultaneously locks out a significant portion of buyers who are now caught in a vicious squeeze. They face the dual pressures of sky-high resale premiums and a HDB Resale Price Index that, despite moderating, continues its inexorable upward march. The index rose another 1.7% in the second quarter of 2024, marking the 17th consecutive quarter of growth and underscoring the relentless pressure on buyers.

In stark contrast, the HDB resale market continues to demonstrate stubborn resilience. Its demand is overwhelmingly local, driven by genuine housing needs from new families, upgraders, and singles, with a robust 7,068 resale transactions recorded in Q2 2024 alone. This segment is far more insulated from the effects of ABSD and is instead primarily influenced by BTO completion timelines, household income growth, and sentiment. The result is a two-track market where the luxury segment cools while the mass-market segment, the bedrock of Singaporean society, continues to heat up, creating an affordability crisis where it is most damaging.

This dynamic traps many Singaporeans in a difficult position. The perceived "safety" and relative affordability of the HDB market are eroding. As prices climb, the gap between a BTO flat and a resale flat widens, placing immense pressure on those who cannot afford to wait four to five years for a new home. This affordability crunch is not just about the sticker price; it directly impacts a household's ability to save, invest, and plan for retirement, as a disproportionate amount of their net worth and future income becomes tied to servicing their housing loan.

Singapore’s stringent regulatory frameworks, such as the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR), are designed to prevent over-leveraging. While prudent, these rules become a significant hurdle in a high-price, high-rate environment. Even with resident household median incomes rising to SGD 10,869, the rapid appreciation of property prices in recent years has outpaced wage growth for many, making it harder to meet the required downpayment and qualify for the necessary loan amount without severe financial strain. This is compounded by the reality of Cash-Over-Valuation (COV), where about a third of buyers are paying above the official valuation, with the median COV holding firm near SGD 30,000 in many estates.

This profound financial commitment ripples into the distant future, directly impacting long-term retirement adequacy. A significant portion of buyers exhaust their CPF Ordinary Account (OA) savings to finance their property purchase, leaving little to no funds for wealth accumulation through the CPF Investment Scheme (CPFIS). This over-concentration of wealth into a single, illiquid residential property creates a fragile retirement plan, one that is heavily dependent on the continued appreciation of that property's value. In a market showing signs of moderation, this strategy is no longer a guaranteed win but a significant and often unacknowledged risk.

This presents a critical personal finance dilemma for young Singaporean couples and families. The BTO route offers a significant price advantage, but it comes at the cost of time and intense competition. The May 2024 BTO exercise saw first-timer application rates for four-room flats hover at 1.7 applicants per unit, a seemingly reasonable figure that masks the ferocious competition for projects in desirable locations. This "BTO lottery" means there is no guarantee of securing a home on the first, or even second, attempt.

The alternative is to enter the resale market immediately, securing a home and location of their choice but at a substantial financial premium. This decision is no longer just about convenience; it is a high-stakes gamble on future income stability and market direction. Choosing the resale path today means taking on a larger mortgage in a high-interest environment, potentially compromising financial flexibility for decades to come.

​The first step is a radical re-evaluation of one's budget, stress-testing mortgage affordability not at today's 3.5% rates, but at a more conservative 4.5% or even 5% to build a robust safety buffer against future rate hikes. Secondly, the ingrained preference for mature estates may no longer be financially viable for many. The trade-off between location and size must be confronted head-on, with non-mature estates offering a more realistic path to securing a larger home without crippling debt. Finally, the "property ladder" concept—starting with a BTO and inevitably upgrading to a private condominium—needs a rethink. For many, the HDB flat may need to be viewed as a long-term family home, a place to build a life, rather than merely a financial instrument to be leveraged for the next acquisition. The future stability of Singapore's property market, and the financial well-being of its citizens, depends on this collective shift from speculative aspiration to prudent, needs-based homeownership.