reporter2
30-01-12, 16:38
http://www.businesstimes.com.sg/sub/news/story/0,4574,475388-1327780740,00.html?
Published January 28, 2012
Lower COVs a harbinger of weaker resale market
Analysts see further softening, citing large BTO pipeline and other factors
By MICHELLE TAN
(Singapore)
LOWER cash-over-valuation (COV) figures were reported for the fourth quarter of last year with consultants expecting further softening from here, providing much sought after relief to future home buyers.
Notably, COV - the cash premium paid by buyers over an HDB flat's valuation - numbers have been showing signs of stabilisation, with the majority of flats across the island reflecting a decline during the final quarter of last year.
Chua Chor Hoon, head of Asia Pacific Research at DTZ, said: 'The median COVs have generally fallen across the island in Q4 2011 compared to Q3 2011, except for five-room and executive flats in a handful of towns. This is a harbinger of a weaker HDB resale market in 2012 as it shows buyers have become less aggressive in offering high COVs. Lower COVs will also affect demand and prices in the HDB upgrader segment of the private residential market.'
Added Ong Kah Seng, director of R'ST Research: 'The slight moderation in COV prices could also be due to the cost conscious buyer who increasingly recognises that in a challenging economic context, a resale HDB flat tends to require more additional after-purchase costs such as for renovations, compared to a new property.'
In addition, the government's large pipeline of build-to-order (BTO) flats also seems to be doing the trick of stabilising HDB resale prices. Registering a slower growth rate of 1.7 per cent quarter on quarter (q-o-q) - compared to 3.8 per cent in Q3 2011 - the HDB resale price index came in at 190.4 in the final three months of last year.
Commenting on the quarter's data, Eric Cheng, CEO of ECG Property said: 'The market seems to have settled in the past month or so. Though COVs have fallen, valuation prices still remain very stable, and asking prices are likely to become more realistic going forward.'
Lower median resale prices were reflected predominantly in four- room and five-room flats in mature estates such as Bukit Merah, Jurong East and Toa Payoh.
Prices of resale flats in most other estates however continued to climb, but experts are confident that the oncoming supply of new flats will put a tight lid on prices in coming months.
Listing out some reasons that could potentially impede HDB resale price growth, Eugene Lim, key executive officer at ERA Realty Network said: 'With a more affordable price tag, lesser initial capital outlay, improved success rate and a shortened waiting time, more and more first-time buyers are preferring BTO flats over resale flats. The increased household income ceiling to $10,000 has also made more first-timers eligible for BTO flats.'
For the period, resale transactions rose a mere 0.3 per cent q-o-q to 5,921 in Q4 2011, after plunging 10 per cent in the period before. This brings last year's total transactions to 24,633, a decline of 24 per cent from 2010.
Said PropNex Realty chief executive Mohamed Ismail: 'The dip in sales volume is due to the minimum occupation period and restrictions on private property owners having to dispose their property within six months as well as the loan-to-value cap of 60 per cent for additional mortgages. These (factors) have led to many HDB homeowners taking a more cautious approach in selling their flats.'
Looking ahead, with 25,000 BTO flats in the pipeline, market watchers expect resale flat sales to fall.
Most consultants expect COVs to continue to ease into the range of $25,000-40,000 this year, while HDB resale prices are seen falling between 3 and 5 per cent over the same period.
Published January 28, 2012
Lower COVs a harbinger of weaker resale market
Analysts see further softening, citing large BTO pipeline and other factors
By MICHELLE TAN
(Singapore)
LOWER cash-over-valuation (COV) figures were reported for the fourth quarter of last year with consultants expecting further softening from here, providing much sought after relief to future home buyers.
Notably, COV - the cash premium paid by buyers over an HDB flat's valuation - numbers have been showing signs of stabilisation, with the majority of flats across the island reflecting a decline during the final quarter of last year.
Chua Chor Hoon, head of Asia Pacific Research at DTZ, said: 'The median COVs have generally fallen across the island in Q4 2011 compared to Q3 2011, except for five-room and executive flats in a handful of towns. This is a harbinger of a weaker HDB resale market in 2012 as it shows buyers have become less aggressive in offering high COVs. Lower COVs will also affect demand and prices in the HDB upgrader segment of the private residential market.'
Added Ong Kah Seng, director of R'ST Research: 'The slight moderation in COV prices could also be due to the cost conscious buyer who increasingly recognises that in a challenging economic context, a resale HDB flat tends to require more additional after-purchase costs such as for renovations, compared to a new property.'
In addition, the government's large pipeline of build-to-order (BTO) flats also seems to be doing the trick of stabilising HDB resale prices. Registering a slower growth rate of 1.7 per cent quarter on quarter (q-o-q) - compared to 3.8 per cent in Q3 2011 - the HDB resale price index came in at 190.4 in the final three months of last year.
Commenting on the quarter's data, Eric Cheng, CEO of ECG Property said: 'The market seems to have settled in the past month or so. Though COVs have fallen, valuation prices still remain very stable, and asking prices are likely to become more realistic going forward.'
Lower median resale prices were reflected predominantly in four- room and five-room flats in mature estates such as Bukit Merah, Jurong East and Toa Payoh.
Prices of resale flats in most other estates however continued to climb, but experts are confident that the oncoming supply of new flats will put a tight lid on prices in coming months.
Listing out some reasons that could potentially impede HDB resale price growth, Eugene Lim, key executive officer at ERA Realty Network said: 'With a more affordable price tag, lesser initial capital outlay, improved success rate and a shortened waiting time, more and more first-time buyers are preferring BTO flats over resale flats. The increased household income ceiling to $10,000 has also made more first-timers eligible for BTO flats.'
For the period, resale transactions rose a mere 0.3 per cent q-o-q to 5,921 in Q4 2011, after plunging 10 per cent in the period before. This brings last year's total transactions to 24,633, a decline of 24 per cent from 2010.
Said PropNex Realty chief executive Mohamed Ismail: 'The dip in sales volume is due to the minimum occupation period and restrictions on private property owners having to dispose their property within six months as well as the loan-to-value cap of 60 per cent for additional mortgages. These (factors) have led to many HDB homeowners taking a more cautious approach in selling their flats.'
Looking ahead, with 25,000 BTO flats in the pipeline, market watchers expect resale flat sales to fall.
Most consultants expect COVs to continue to ease into the range of $25,000-40,000 this year, while HDB resale prices are seen falling between 3 and 5 per cent over the same period.