HDB resale prices dip for first time since 2009

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HDB resale prices dip for first time since 2009

More sellers offloading flats below valuation as sentiment remains poor

Published on Oct 26, 2013

By Daryl Chin Property Correspondent And Rachel Au-yong


PRICES of resale HDB flats fell 0.9 per cent in the third quarter of this year as the number of sellers offloading their flats below valuation grows.

Not only was it the first decline since the start of 2009 when a deep recession hit, but the typically strong third quarter also saw the number of deals dropping to 4,529.

This is a 13 per cent dip from the preceding quarter and a far cry from the 6,560 deals done in the third quarter of last year.

Private home prices, on the other hand, rose 0.4 per cent in the third quarter, according to the Urban Redevelopment Authority.

The price decline in public housing, property analysts say, is a result of stricter controls on home loans as well as the attractiveness and volume of new Build-To-Order offerings.

PropNex chief executive Mohamed Ismail said the resale market has been serving mostly HDB upgraders of late.

This is because singles can now purchase new flats direct from the Housing Board, while newly minted permanent residents have to wait three years before they can buy a resale flat.

As a result, market sentiment is poor, and this has led to some sellers putting their flats up for sale at prices below valuation before the market dips further, he noted.

"These are sellers who are in sore need of cash. (The flats) can either be in areas where supply is far greater than demand such as Punggol, or less desirable units in areas where valuations are already high, such as the central areas like Toa Payoh," he said.

In Punggol for instance, the median resale price and cash over valuation (COV) of a five-room flat - at $560,000 and $30,000 respectively in the second quarter - has fallen in the third quarter to $542,000 and just $8,000.

According to agency data, the median COV has dropped from $35,000 at the start of the year to $15,000 now, and transaction volumes are heading towards a 16-year low.

"The market is still feeling the effects of the cooling measures introduced at the start of the year, although flats in good locations will be able to hold their price," added ERA Realty key executive officer Eugene Lim.

Now, a buyer can use only 30 per cent of his gross monthly income to service the mortgage of his HDB resale flat.

The maximum loan terms from HDB and private banks were also reduced to 25 and 30 years respectively.

Together with the 60 per cent cap on total debt obligations introduced in June, the curbs have forced buyers to take out smaller loans and scale down purchases.

The latest data showed a 0.6 per cent rise in the number of flats approved for rent.

"A lot of HDB upgraders are keen to rent out their flats, especially now that many new private properties have been recently completed," said R'ST Research director Ong Kah Seng.

Public housing, he added, typically provides "good rental yields" of around 5 per cent.

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http://www.businesstimes.com.sg/archive/saturday/premium/top-stories/q3-resale-flat-prices-drop-first-time-over-4-years-20131026

Published October 26, 2013

Q3 resale flat prices drop - first time in over 4 years

Analysts say recent property measures are taking their toll

By ong chor hao [email protected]


AS a raft of property and credit measures continue to work their way through the property market, prices for resale Housing and Development Board (HDB) flats fell for the first time in over four years.

Data from HDB yesterday showed that the resale price index (RPI) fell 0.9 per cent in Q3, compared with a 0.5 per cent gain in the previous quarter. This is the first time the index has declined since Q1 2009.

Measures introduced between June and August, such as the total debt servicing ratio (TDSR) framework, a tighter mortgage servicing ratio (MSR), lowering the maximum loan tenure, allowing singles to purchase Build-to-Order (BTO) flats, as well as a three-year wait for all new permanent residents before they can buy a resale flat, all took their toll, analysts said. Further siphoning interest from the resale market in Q3 was a steady supply of BTO homes in the works.

"The HDB resale market is effectively serving only upgraders and limited permanent residents now, resulting in the weakening of prices and volume of transactions," said Mohamed Ismail, CEO of PropNex Realty.

The official RPI drop was also larger than the earlier flash estimate of minus 0.7 per cent. Consultants attributed this to a delayed impact from the tighter MSR introduced in August, as well as from the TDSR implemented in June.

Ku Swee Yong, CEO of Century 21 Singapore, said the TDSR "really kicked in" around August/September as some transactions might have been slowed as buyers and bankers tried to come to grips with the new rules.

The number of resale flats sold in Q3 fell 13.5 per cent to 4,529 units, from 5,235 units in Q2. All flat types, from one-room to executive, saw fewer units changing hands. The largest absolute fall came from the four-room flat segment. It saw a 13 per cent drop in transactions to 1,670 units from 1,922 in Q2.

The cash premium of cash-over-valuation (COV) also fell. ERA Realty data shows that the median COV fell by a third from the previous quarter to $18,000 in Q3. PropNex data revealed a similar trend, with COVs at a median of $17,000 in Q3.

HDB data showed notable quarterly drops in COVs in some pockets of the market in Q3, such as a $20,000 fall in median COVs for executive flats in Pasir Ris to $50,000, and a $19,000 decline in median COVs for five-room flats in Toa Payoh to $54,000.

Sellers are "generally more accommodating" at the moment, said Eugene Lim, key executive officer at ERA Realty.

"Already, more and more larger flats (five-room and executive) in non-mature estates are being transacted at valuation or below valuation," he said, adding that there was concern from three- and four-room flat owners, too, that COVs will fall further if they did not sell now.

A report by the Singapore Real Estate Exchange said about 10 per cent of resale flats sold last month transacted with no COV.

Besides the impact from the various measures, supply remains an issue that would affect prices. Ong Kah Seng, director at R'ST Research, sees resale HDB prices declining by up to one per cent this year. Mr Ismail from PropNex expects to see "less than one per cent to possibly a negative growth" for 2013, and that prices could fall further next year, at minus 3 to 5 per cent.

Meanwhile, Minister for National Development Khaw Boon Wan wrote on his Facebook page yesterday that the actual number of private and public homes that will be ready for occupation by 2016 is now expected to be 204,400 units, surpassing his ministry's earlier projection of 197,550 units.

"For this year, more than 21,000 residential units have already been built; another 9,220 units will be ready by year-end."

As for new BTO homes, HDB should hit its target of 25,000 units for the year, having launched 20,161 BTO flats to date and offering another 4,950 BTO flats next month. Another 4,455 Sale of Balance Flat (SBF) units have been offered this year, with another 3,000 to be offered next month.

Consultants generally agree that the number of resale transactions will come in below 20,000 units this year, which will be the lowest on record. They also see continued moderation of COVs, although Mr Lim from ERA said it was unlikely that the median will reach zero because of strong economic fundamentals.

On the rental front, the number of subletting transactions fell 5 per cent to 7,505 cases in Q3, from Q2's 7,891 cases. The number of flats approved for subletting edged up 0.6 per cent to 44,966 homes.