Average resale prices have also climbed, with two-room flats seeing a 45.4 per cent increase during the first 11 months of 2024, compared with the same period in 2020.- ST
SINGAPORE: When Lim put his three-room HDB flat in Tampines on the market in September 2023 after it reached its minimum occupation period (MOP), he was not expecting the overwhelming interest it received.
Listed at S$470,000, the flat attracted three groups of viewers on the first day alone. By the end of the week, at least 10 groups had viewed the unit.
The property was eventually sold at $480,000 – above the asking price – to a woman who is single, said Lim, a 34-year-old information technology executive who wanted to be known only by his surname.
Lim, who sold his unit because he wanted to upgrade to a four-room flat, said the buyer exercised the option the following week.
His experience is an indication of how demand for smaller flats has surged over the past four years, which industry watchers say could reflect changing demographics and shifting buyer sentiments as larger flats get more expensive.
Christine Sun, chief researcher and strategist at OrangeTee Group, said that from January to November, 740 two-room flats were sold, almost double the 388 such units sold in the same period in 2020.
For the same period, three-room flat transactions rose by 30 per cent, while sales of four-room flats rose by 27.7 per cent and five-room units by 13.7 per cent.
Average resale prices have also climbed, with two-room flats seeing a 45.4 per cent increase during the first 11 months of 2024, compared with the same period in 2020; while three-room flats posted a 41 per cent increase.
Experts said there are several factors contributing to the heightened interest in smaller flats – particularly two- and three-room flats.
Sun pointed out that one reason could be due to more of such flat types recently having reached their MOP.
From 2019 to 2024, there were 15,462 two-room flats that reached their MOP, up from 4,627 units between 2013 and 2018 – a 234.2 per cent increase.
Similarly, some 23,556 three-room flats reached their MOP from 2019 to 2024, a 122.9 per cent rise from the 10,568 units from 2013 to 2018, noted Sun. - The Straits Times/ANN
“With more supply available in the market, there have been more sale transactions,” she said.
Demographic changes, such as an ageing population, shrinking household sizes and more singles opting to live independently, have further boosted demand for smaller flats, said analysts.
ERA Singapore’s key executive officer, Eugene Lim, said concerns about the rising cost of living could also have led more Singaporeans to consider smaller homes, which are generally more affordable.
Lim pointed out that the average HDB household size shrank from 3.4 people in 2014 to three in 2023.
Households with three or fewer members grew 38.2 per cent during this period, from 638,500 in 2014 to 882,400 in 2023, he said.
“Two-room flats appeal primarily to singles, while three-room flats attract both singles and small families... particularly those with tighter budgets. Two- and three-room flats are also likely to incur lower renovation costs compared with the larger flats,” Lim said.
He added that from October to December 2020, the median price of a two-room flat stood at $238,000. It rose to $353,000 in the last three months of 2024, while the median price of three-room flats rose from $308,000 to $430,000 in the same period.
In contrast, the median price of a four-room flat reached $615,000 in the last three months of 2024, making smaller units more attractive to cost-conscious buyers, said Lim.
He added that older residents, in particular, may downsize to smaller flats for a variety of reasons – they might want to unlock equity to support their living expenses – and the upkeep of such homes is also easier as mobility declines with age.
OrangeTee property agent Susan Mariam said she closed about 40 HDB deals in 2024, of which 90 per cent were three-room flats.
Her clients included singles and the elderly who downsized from “bigger houses” as their children have grown up and they want to have more cash for expenditures.
Mariam said she also saw some young couples selling their flats after they reached the MOP and downsizing to a smaller one to pay off their loans.
Property agent Emmeric Ong from Huttons said he has received more inquiries for two- and three-room flats. He added that his clients include “young couples who either do not plan to start a family or plan to only have one child, so a three-room flat is ideal and cost-effective”.
Analysts say this demand for smaller flats is likely to persist if demographic and market price trends continue.
But Sun said the pace of price growth could slow down as Build-To-Order flats are released for sale, as this could draw some demand from the resale market.
“Currently, single individuals can also purchase new two-room flexi flats across the island, and various grants are available. This may improve affordability for buyers, especially those with lower incomes,” she added. - The Straits Times/ANN
