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View Full Version : COV for HDB resale flats hits four-year low



reporter2
11-10-13, 12:11
http://www.businesstimes.com.sg/specials/property/cov-hdb-resale-flats-hits-four-year-low-20131011

Published October 11, 2013

COV for HDB resale flats hits four-year low

But overall prices up 0.2% in Sept, Real Estate Exchange flash figures show

By Mindy Tan [email protected]


CASH-OVER-VALUATION (COV) for resale flats extended their decline last month, shedding another $3,000 to hit $15,000 - the lowest level since July 2009, according to flash estimates released by the Singapore Real Estate Exchange yesterday.

Despite this, overall resale public-housing prices inched up 0.2 per cent last month, reversing four consecutive declines in the preceding months.

ERA's key executive officer Eugene Lim said that he expected COVs to continue moderating in coming months given the impact of the cooling measures and the increase in new flat supply.

"We are likely to see a median of around $10,000 by year-end," said Mr Lim. "With lower COVs, lower resale transaction prices are expected . . . We can expect prices to continue moderating in the fourth quarter and quite possibly the first quarter of next year when transactions are traditionally slower due to the festive period," he added.

While sellers of three-room and four-room flats with less attractive attributes are generally more accommodating because they are worried that if they do not lock in their buyers now, COVs will dip some more, prices of flats in mature estates with good attributes are still holding their own because of scarcity and high demand.

Notably, demand for smaller and average size flats generally held firm or even improved slightly while interest in five-room and executive flats was muted as the new mortgage servicing ratio (MSR) cap meant that fewer buyers can secure large loans, said Ong Kah Seng, director at R'ST Research.

"For the remainder of the year, COVs and prices will continue to moderate marginally and COV has the potential to reach an average of about $12,000 by year-end," predicted Mr Ong.

Resale transaction prices are expected to see dips of up to 2 per cent in Q4, he added.

However, transaction volumes are expected to be below 20,000 in 2013, the lowest in the history of the HDB resale market, said Mr Lim.

This stems from the lowering of the MSR cap to 30 per cent, and changes in government policies, such as allowing singles to buy Build-To-Order flats and requiring permanent residents to wait for three years before purchasing a resale flat. In addition, the Housing and Development Board (HDB) has been actively rolling out new flats to meet pent-up demand.

Already, transaction volumes have fallen. Last month, an estimated 1,164 resale flats were bought, compared with 1,193 flats the month before. Between July and September this year, an estimated 3,661 resale flats changed hands, down 33 per cent from a year earlier.

The same drop in year-on-year transactions was seen in the private resale arena, where some 1,478 units were picked up between July and September this year, a drop of 57 per cent compared with last year. About 462 non-landed homes changed hands last month, compared with 447 in August.

Meanwhile, resale prices of non-landed homes slipped 1.6 per cent last month, led by a 3.5 per cent drop in the Rest of Central Region (RCR) and followed by a 1.5 per cent drop in the Outside Central Region (OCR). Conversely, Core Central Region (CCR) resale prices rose 2.5 per cent after two consecutive monthly drops in July and August.

This could have been due to the cautious sentiment among HDB upgraders, who typically rely on the value of their resale flat to fund the purchase of a private property, said Christine Li, head of research and consultancy at OrangeTee.

Given that the resale market generally caters to owner-occupiers, this could explain the price decline in RCR and OCR, but not CCR.

Going forward, market watchers reckon that transaction prices will be lower.

"We expect private home transactions to be supported by genuine demand, but buyers will become more selective," said Ms Li. "Gone are the days when sellers can ask for astronomical prices and expect cash-rich buyers to knock on their doors."

ERA's Mr Lim agreed, saying that he expected more transactions to take place in the lower $800,000 to $1.4 million range as permanent residents who are unable to purchase resale HDB flats are forced to look at the private residential resale market.

Rental for non-landed private homes slipped 1.1 per cent last month, registering the biggest monthly rental price decline since the beginning of this year.

Rents in all three regions trended downwards - rents in the CCR dropped 1.9 per cent followed by a 0.7 per cent drop in the RCR and 0.5 per cent drop in the OCR.

"With more projects obtaining their Temporary Occupation Permits (TOP), together with the cutting of foreign manpower hiring, the rental market is under pressure. This is especially so for older apartments and condominiums," noted ERA's Mr Lim.

On average, gross rental yield for non-landed homes ranged between 3.1 per cent and 3.9 per cent in Q3 this year, down from the yield band of 3.3 per cent to 4.2 per cent in the same quarter last year.

reporter2
11-10-13, 12:30
http://www.straitstimes.com/premium/top-the-news/story/median-cash-premiums-flats-down-15k-20131011

Median cash premiums for flats down to $15k

COVs at their lowest since July 2009; analysts expect a drop to $10k soon

Published on Oct 11, 2013

By Charissa Yong


CASH premiums for Housing Board flats hit a new four-year low last month and are expected to slide even further over the next few months.

The median cash-over-valuation (COV) fell by $3,000 to $15,000 last month, according to Singapore Real Estate Exchange (SRX) estimates released yesterday.

This was the lowest since it hit $10,000 in July 2009.

Analysts expect COVs to fall to $10,000 soon.

ERA Realty key executive officer Eugene Lim said: "The dip in COV is expected to continue and we are likely to see a median of around $10,000 by year end."

This is because the lower mortgage servicing ratio and shorter loan tenure both dampen demand for more expensive resale flats.

The three-year wait before new permanent residents can buy flats also removed about 20 per cent of demand from the resale market, said OrangeTee research head Christine Li.

She predicts COVs will drop to below $10,000 by year end.

R'ST Research director Ong Kah Seng said COVs and prices should continue to decline until they stabilise in next year's second quarter.

"With COVs continually falling... there will come a stand-off where sellers resist further lowering prices since more buyers will find resale flats affordable.

"Sellers, however, cannot raise prices excessively even with this improved demand, since the mortgage servicing ratio cap essentially restricts buyers from borrowing more to finance the flat," he said.

For now, the drop in COV had little effect on overall HDB resale prices which inched up 0.2 per cent from August, after four consecutive declines in preceding months, said SRX.

HDB figures out last week, however, showed that HDB resale prices fell 0.7 per cent in the third quarter, the first quarterly dip since early 2009.

Resale volume stayed low. An estimated 1,164 HDB flats were sold in the resale market last month, slightly lower than 1,193 flats in August.

Furthermore, 33 per cent fewer HDB flats were sold in the third quarter of this year, compared with the same period last year.

Experts said that resale prices are likely to slip further in the final quarter of the year because of the festive period, in which fewer flats typically change hands.

Demand for resale flats is also expected to keep falling, given the large supply of 110,000 new HDB units that will be completed over the coming years, noted ERA's Mr Lim.

"We expect total resale transactions of below 20,000 (this year). This will be the lowest ever," he added.

[email protected]

reporter2
11-10-13, 12:31
http://www.straitstimes.com/premium/top-the-news/story/more-zero-cov-deals-20131011

More zero-COV deals

Published on Oct 11, 2013

By Daryl Chin Property Correspondent


ONE in 10 Housing Board resale flats sold with zero cash- over-valuation (COV) last month, the highest proportion of such deals since June 2009.

According to the Singapore Real Estate Exchange (SRX), 83 flats sold with no premiums, or cash incentives, to entice the seller.

Property analysts point to several factors for this.

One is that valuations for flats seem to have hit a plateau, with the HDB's resale price index dipping by 0.7 per cent in the third quarter after a bull run that began in the second quarter in 2009.

As a result, sellers might have been eager to sell their flats at valuation prices to secure their capital gains, they say.

At the same time, buyers are also cautious amid a weak market that is expected to see the lowest number of resale transactions since 1997.

Fuelling this caution is a slew of new rules this year - such as tighter loan restrictions and a three-year wait for permanent residents to buy resale flats - which have reduced demand significantly.

Larger flats have taken a hit as a result of buyers now having to take smaller loans, according to SRX.

About 13 per cent of all five-room flats transacted last month sold with zero COV, compared with 1.7 per cent in January this year.

In terms of locations, zero-COV transactions occurred mostly in areas like Jurong West, Punggol and Sembawang.

PropNex chief executive Mohamed Ismail noted that one out of every two flats in Punggol was sold at valuation price.

"There is an oversupply of flats in that area as many hit the minimum occupancy period at the same time. For the other areas, it is simply that they are in outlying areas with fewer amenities," he said.

He expects the number of flats trading at zero COV to hit 20 per cent by year end due to a strong oversupply of resale units and weak demand.

But ERA Realty key executive officer Eugene Lim noted that flats in good locations and close to amenities can still command sizeable premiums.

[email protected]