Admit it. You never cared about how much a HDB flat costs, until you have to sit down and negotiate the price with the Buyer/Seller. While estimating the value of your flat is not rocket science, you definitely can’t do a good analysis on the night before the negotiation! Therefore, it is important to make sure you know what you’re getting into.
After knowing the importance of having a good estimate of your flat value, Mr Salty will go through the steps of finding the information, how to analyse the information, as well as the factors that will affect your final estimate. This will prevent you from quoting a price based on emotions, and save you time and money from the mistake of over/under estimating the flat’s value!
Why It’s Important To Get A Good Estimate Of Your HDB’s Value
Getting your HDB value wrong will mean delaying the whole buying process by at least another 1.5 weeks!
To answer this question, we have to refer to Mr Salty’s earlier post, where he talked about the steps to getting a resale HDB flat speedily. In essence, it’s not about having a “good” valuation for your HDB. Instead, it’s about making sure the valuation is not far off from HDB’s valuation.
35 Year-Old Single Singaporean Wants to Own A HDB Resale Flat Chop-Chop
After the Option to Purchase (OTP) is signed, the Buyer is to submit a Request for Value to HDB the next day. HDB will then notify in about 1.5 weeks’ time of the outcome of their valuation.
According to Mr Salty’s agent, if HDB’s valuation falls within a (undisclosed) range between the price agreed between the Buyer and Seller, HDB would just indicate whether the transaction is good to go. The tricky part arises when HDB’s valuation is out of the range of the agreed price.
When HDB’s valuation differs too much from the agreed price, HDB will then make the valuation known to the Buyer and Seller, who will then have to decide whether they want to continue the transaction with HDB’s valuation, or to withdraw the OTP and negotiate for another price.
In the latter case, it would mean delaying the whole buying process by at least another 1.5 weeks.
Note: Mr Salty does not know why anyone would proceed if HDB’s valuation differs from the agreed price. If the HDB valuation is more than the agreed price, the Seller would definitely want to go with the HDB valuation. On the contrary, the Buyer would definitely not be willing to pay the difference with cash (since the bank loan won’t cover the difference).
Finding Past Transaction Prices of HDB Resale Flats
Unless you are fine with spending extra time haggling over the price, or you don’t mind paying extra cash (not covered by the housing loan) to acquire the new flat, you should be motivated in making sure the agreed selling price is within the range accepted by HDB. This makes trying to gauge the value of your new HDB flat even more important.
Here are the steps that Mr Salty’s agent went through with him in order to come up with a good estimate of the flat he wanted to buy, before they entered into the price negotiation with the Seller.
Obtain A Map In The Vicinity Indicating The Block Numbers
Having a map of the neighbourhood of your target flat, indicating the block numbers, would be very useful in the coming steps.
Mr Salty’s agent was an old youtiao, so he remembered the blocks in the vicinity of Mr Salty’s target flat. However, Mr Salty is a 傻白甜 (innocent and docile, you know…). As such, he had to prepare a map of the neighbourhood that indicates the block numbers.
As his experience goes, not all block numbers show up on Google Map. Instead, good old Street Directory is more handy!
Go to HDB’s Website
Next, go to HDB’s Resale Flat Prices portal. Once there, you would need to fill in the required fields (indicated by “*”) to call out the HDB resale prices of the neighbourhood.
Narrowing Down The Area
Mr Salty found it useful to also include the street name, though it’s not a required field.
When you search without the street name, the results will return ALL the transactions within the town. We all know that the prices of flats near an MRT station will be higher than those at the fringe of the town. Therefore, if your target flat is not near the MRT station, having them in the search results would just make the comparison complicated.
Narrowing Down The Transaction Period
Likewise, it would make no sense for comparison, if you call out the HDB resale prices for the whole 10 years. Looking back just 1 year would be sufficient. From there, you can get a sense of the trend of the recent prices (is it going down, or trending up?).
The trend sensing would be helpful after you have figured out an estimated price of your target flat (which would be a range). WIth both information, you can then decide how much higher or lower to go when negotiating the price.
It’s not everyday that a flat in your block or the neighbourhood goes on sale. There will be a spike in transactions for flats turning 5 years old (after the Minimum Occupancy Period is up), and from there, the sales will trend downwards. Therefore, in a neighbourhood that consists of flats that are more than 15 years old, you may need to search further back, by 2 years.
The search results should look something like this:
Note: If there are still not enough transactions, you can go to https://data.gov.sg/dataset/resale-flat-prices, which allows one to download transactions dating more than 2 years back.
Note 2: In view of the pandemic, Mr Salty thinks that narrowing the transacted prices down to 6 months would help in getting a better estimate. Experts had estimated that the pandemic would cause the prices to drop by 2% in a short period of time. If you search for transactions that took place before the pandemic, your estimate would be skewed.
Analysing The Data
This is when the map will come into use. Within a year, the number of flats transacted in the block of your target flat will not be enough for you to estimate the flat’s value. Therefore, you will have to look at the flats in the vicinity to get a bigger sample size. At the same time, you also don’t want to look so far out, until the locale is too different from your flat.
Factors To Look Out For
Therefore, when figuring out which transactions to consider, find the ones that are close to:
- Flat Type – It must match your flat type (3/4/5 rm flat?)
- Your Block – A unit in your block would be ideal. If not, find those close to your block
- Storeys – HDB’s data only provides a range for storeys. So if your flat is at level 7, only zoom in on those transactions under “07 – 09” for “Storeys”
- Remaining Lease – Usually, blocks within the same locale are around the same age. However, be aware of exceptions
Other Factors to Consider
After plotting out the prices of resale HDB flats in the vicinity, you also need to find out if there are factors that will affect their prices. For example, a flat that’s beside a primary school will fetch a slightly higher price than one that is not near one.
With that, you can average out the prices and then adjust upwards or downwards your estimate, given the location of your flat. Like the example above, if your flat is near a school and a bus stop, then you may have to add a few thousands to your estimate.
Finding The Average, Upper and Lower Limits
In the example Mr Salty used, he searched for transactions at Punggol Field in the past 1 year. Among this, he narrowed his search down to the ones between Storey 10 – 12.
| Town | Block | Storey | Floor Area (sqm) /Flat Model | Lease Commence Date | Remaining Lease | Resale Price | Registration Date |
|---|---|---|---|---|---|---|---|
| Punggol | 259C | 10 to 12 | 93.00 Model A | 2016 | 95 years 6 months | $470,000.00 | Jan 2020 |
| Punggol | 259A | 10 to 12 | 93.00 Model A | 2016 | 95 years 4 months | $480,000.00 | Feb 2020 |
| Punggol | 258A | 10 to 12 | 93.00 Model A | 2016 | 95 years 3 months | $490,000.00 | Mar 2020 |
| Punggol | 258C | 10 to 12 | 93.00 Model A | 2016 | 95 years 1 month | $478,000.00 | May 2020 |
| Punggol | 169C | 10 to 12 | 92.00 Model A | 2014 | 92 years 11 months | $422,000.00 | Jun 2020 |
| Punggol | 258C | 10 to 12 | 93.00 Model A | 2016 | 95 years 1 month | $492,888.00 | Jun 2020 |
| Punggol | 259A | 10 to 12 | 93.00 Model A | 2016 | 94 years 11 months | $480,000.00 | Jul 2020 |
| Punggol | 259A | 10 to 12 | 93.00 Model A | 2016 | 95 years | $482,000.00 | Jul 2020 |
| Punggol | 259C | 10 to 12 | 93.00 Model A | 2016 | 94 years 11 months | $468,000.00 | Jul 2020 |
| Punggol | 258C | 10 to 12 | 93.00 Model A | 2016 | 94 years 9 months | $485,000.00 | Oct 2020 |
In the example, the average of the 4 transactions is $474,788, with the highest resale price at $492,888 and lowest at $422,000.
| Average | $474,788.80 |
| Maximum | $492,888.00 |
| Minimum | $422,000.00 |
Since the trend in that year is flat, the maximum and minimum prices will act as the upper and lower limit for negotiating the resale price.
Furthermore, assuming the block Mr Salty is looking at is located beside TPE and away from the bus stop, he can even restrict his negotiation price to between $422,000 to $474,788. On the other hand, if the target flat is near Punggol MRT Station, then his negotiation price should be between $474,788 to $492,888.
Using The Estimated Valuation
Of course, the above analysis is useful if you’re doing it on your own. If you have an agent, he or she should be able to do it for you. All that’s said, you can still use it to communicate with your agent to let him know the range of prices you are comfortable with. (Or, like Mr Salty, to let his agent know that he cannot smoke him) He will then advise you based on his expertise and current knowledge of the neighbourhood, before proceeding to negotiate the price on your behalf.
The last thing you’d want is to pay for your new flat using emotions!
Parting Words
Estimating the value of your new flat is a minor part of the process to buy a resale flat. However, if you screw the valuation, you would have to waste time and money to re-negotiate the price. Therefore, it is still important to do your homework and research on the recent transaction prices.
The last thing you’d want is to pay for your new flat using emotions!
If you find this post useful, remember to Like and Share it with your friends. You can also check out Mr Salty’s other posts on his experience buying his new HDB resale flat and renovating it.
Remember, salty is life.