Updating - Million Dollar Public Homes and how to find them in Singapore

# Recap

Singapore saw a huge surge in million dollar public homes since the dawn of the global pandemic in late 2019, even though our first million dollar public home was first transacted in 2012. And with many media outlets harping on these million dollar public home sales, there is growing resentment that public homes are getting too expensive for the typical Singaporean household, when they are suppose to provide affordable housing to the common Singaporean household.

The updated table (with Oct 2022 resale transactions) shows the strong growth in million dollar public homes in both traditionally expensive and cheaper residential regions, which matches with some of the sentiment on Singapore’s rising property market prices.

{ insert table 1 }

# 1. Remaining Lease

Singapore public homes are all on a 99-year lease, and they were to ensure the Singapore government can better plan their future land use needs as Singapore grows and evolves as a society. For example, in 2020, a stretch of private property were taken back for redevelopment by the Singapore government after their lease expired in 2020.

And while no public homes leases have expired yet, the government can take these public homes back at zero cost once their lease expires. As such, home prices should decrease as they get older and nearer to their lease expiry dates. Hence, older public homes should also generally be cheaper than newer public homes, ceteris paribus.

To explore the relationship between the public home’s remaining lease and price, I created a box plot of million dollar public home transactions with their remaining leases by region (Figure 1).

Interestingly, we can see that certain regions have million dollar public homes with only 50 to 60 years of lease left at their point of sale! Given that the Singapore government never sold million dollar public homes directly to the public before, these old public homes were seeing an increase their prices as they grow nearer to their lease expiry!

{ insert Fig 1 }

# 2. Not just “location, location, location...”

According to classical urban economics theory, houses in accessible, central regions will just be more expensive due to their access to amenities. But for Singapore’s million dollar public homes, another factor also comes into play — size.

The Figure 2 scatter plot shows that some of these million dollar public homes are as large as 3,000 square feet! These huge public homes not built any more by the Singapore government, and are in limited supply on the resale market. So it is not surprising that their size rarity can fetch million dollar prices in the resale market, despite their little lease remaining.

For comparison, the larger Singapore public home built in recent years are closer to 1,000 to 1,500 square feet. Interesting, newer public homes in certain regions that are around 1,000 square feet may be worth a million dollars as well.

{ insert fig 2 }

Increasingly, we see stories of public home buyers who are downgrading from private homes, and they are willing to pay a premium for a larger space and also to live in more central areas. Buyers of these older public homes are most probably not concerned about selling their homes in the future, but rather, want to live the rest of their lives in these public homes. Hence, they would also be not as concerned about the remaining lease of their public homes at the time of the purchase.

# 3. Accounting for flat sizes - Price Per Square Feet

To remove the effects of flat size on housing prices, we can look at price per square feet instead. In particular, we can do a scatter plot to compare the price per square feet of these homes to their remaining lease (Figure 3), and the scatter plot does show a positive correlation between price per square feet and remaining lease, suggesting that older public homes do cost less per square feet than to newer public homes, ceteris paribus.

{ insert fig 3 }

The price per square foot of range of million dollar public homes is from SGD 365.15 to almost SGD 1,400, but if we only look at the newer public homes (remaining lease ≥ 85), their price per square feet is from around SGD 750 to SGD 1,400.

# 4. Other factors

There are other factors that would make a public home more valuable, and one factor is the floor the housing unit is at. In general, million dollar public homes are largely located on higher floors on the housing estates.

{ insert table 2 }

However, I am mindful that not all large and high public homes are worth a million dollars, because people are largely more in love with the views. So if your home doesn’t have a great view, that may reduce the possibility of you being able to sell a million dollar home.

# 5. Factors I cannot account…

There are also factors that I cannot account for because they are not available in the publicly released data set.

Firstly, as mentioned, while we have the floor of the public housing sold, we do not know the direction of the housing unit, such as if the home has an unblocked view or if it gets direct sunlight that heats up the house during the day. Both of these factors would influence the home prices.

Secondly, there is also no data on the condition of the house. Remaining lease can be a proxy of the home’s condition, but there are other aspects like the interior designs and overall maintenance of the homes. Homes with better interior finishing or is better maintained is most probably able to fetch a higher resale price, as the buyer can potentially save on renovations costs and more quickly move into their new home after the purchase.

Lastly, surrounding amenities of the public home is also important. While the region of the home gives the informed reader knowledge of whether the housing is in a central area or not, it does not directly mention access to other amenities like shopping malls, parks, schools and public transport systems.

# 6. Moving forward…

From the factors that I could look at, here are some of the attributes of million dollar public homes in Singapore:

Great regions — Being in certain locations help : Central Area, Bishan, Queenstown, Toa Payoh, Bukit Merah and Kallang / Whampoa
Huge sizes — Million dollar public homes have to be huge (or historically, at least 935.6 square feet).
Size can compensate for lesser lease remaining — Extremely large public homes (> 2000 square feet) can still be worth more than a million dollars, even if they have remaining leases of 50–60 years.
Being on high floors — A large portion of these million dollar public homes are on higher floors (>10 floors or above).

Overall, the data did not reveal anything shocking per se to me. However, it was still interesting to get actual data back up some of my original intuition of these million dollar Singapore public homes.

With the latest cooling measures announced by the Singapore government in September 2022 to combat the rising public housing prices, many Singaporeans are looking to see if our public housing prices will start to decline. I do hope to do an updated analysis at the start of 2023 to see how the September 2022 cooling measures have impacted the Singapore public housing prices. Do follow me if you are interested in that piece of analysis!

Tags: Public Housing, Million Dollar |