Decoding Home Prices: How Much More Expensive Is A Condo?

The difference between resale condo and HDB prices gives us an indication of how much more the market values a condo over an HDB. Therefore, understanding this gap across years allows us to draw deductions on whether market trends have evolved as well as if there are opportunities to enter or exit either market. This is what I discovered when looking at the gap in prices since 1995.

We can see that there are almost two distinct patterns in time, before and after 2009, which i will further elaborate on in the subsequent paragraphs.

Part 1: Before 2009

Between 1995 and 2008, the price gap between both markets swung widely, likely due to speculative sales and purchases as this period was before cooling measures were implemented. We can see that there is a reversion to a mean of approximately 1.6 times during this period. The wild swings were also made worse with the multiple crises such as the Asian financial crisis in 1997, 9/11, the Iraq war, SARS, and the Global Financial Crisis. 

Part 2: After 2009

From 2009 to 2020, the gap between condos and HDBs continued to widen, implying that throughout this decade, it has become increasingly harder year-on-year for HDB upgraders to move into the private market, with many essentially having to sacrifice space to make the transition.

When I further looked at the data by graphing the growth in HDB prices, we can see that in the decade from 2009-2019, the widening of prices was mainly led by higher price growth in condo prices, except in 2014 and 2015, since HDB prices also recorded price growth in the decade.

Cooling measures, first introduced in 2009 and incrementally throughout the years since then, have seemed to have a larger impact on HDB prices, since the price gap between both markets has continued to increase.

Part 3: Since COVID-19

Since COVID-19 in 2019, we can see that the difference in price between condos and HDB flats has gotten smaller, mainly led by strong price growth in the HDB market.

The gap between the condo and HDB markets has now narrowed to levels not seen since 2015. So how can we use this insight to our advantage?

For HDB upgraders, this represents an opportunity to move into the condo market, since the price gap has narrowed. For first-time buyers, the resale HDB market might be over-valued, and it might be a better choice to instead look out for resale condos.