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Oct 23, 2010

Fewer HDB resale flats change hands

But prices rise 4 per cent in third quarter to hit yet another record

By Jessica Cheam, Housing Correspondent


THE recent measures to cool the HDB resale market have led to fewer flats being bought and sold, but they have yet to make a discernible impact on prices.

According to official figures released by the Housing Board (HDB) yesterday, resale flat prices rose 4 per cent in the third quarter of this year to hit yet another record.

This is the ninth straight quarter of rising prices. Prices had risen 4.1 per cent in the second quarter compared to the first.

The median cash-over-valuation (COV), which is the cash premium buyers pay above the flat's valuation, was also unchanged at $30,000.

In fact, median COVs for four-room, five-room and executive flats actually rose, to $32,000, $35,000 and $40,000 in the third quarter from $30,000, $33,000 and $36,300 in the previous quarter respectively.

COVs are one measure of how hot the demand is for resale HDB flats.

Yesterday's data therefore shows that the new measures introduced on Aug 30 to tighten home financing and restrict ownership of public housing are not yet officially translating to lower resale flat prices.

The measures have, however, curbed flat sales. Resale HDB transactions fell by 10 per cent to 8,205 deals in the third quarter from 9,114 in the second quarter, largely due to a 25 per cent dip in deals last month compared to August.

Commenting on the numbers, the HDB said the full impact of the cooling measures will be captured only in the fourth quarter data as the majority of the deals done in the third quarter were submitted to HDB before the new rules.

Some property analysts had other explanations for the lag in effect. They said that prices are not falling yet because many sellers have simply taken their flats off the market in response to souring sentiment, instead of accepting lower prices.

Mr Colin Tan, head of research and consultancy at property firm Chesterton Suntec International, noted that while demand-side measures seem to have had an impact, prices could be sticky downwards as supply is limited.

'Some owners are holding on to their HDB flats, and the fresh supply of flats coming onto the market at the end of the five-year minimum occupation period is not enough,' he said.

Still, C&H Properties division director Nelson Tan, an HDB specialist, said prices will not hold for long.

'The reason is prices now are still supported by higher flat valuations, which are based on the recent housing boom, but this will eventually come down as prices soften,' he said.

Indeed, property agencies such as PropNex and ERA Asia Pacific which have captured more up-to-date transactions said prices are starting to show a dip of 3 per cent to 5 per cent.

PropNex chief executive Mohamed Ismail said that the firm's data for this month showed median COV levels slipping to about $25,000, $30,000 and $35,000 for four-room, five-room and executive flats respectively.

Both PropNex and ERA data show that the median COV has dropped from $30,000 to $25,000.

Mr Ismail expects resale deals to dip a further 20 per cent in the fourth quarter, with COV levels stabilising at $22,000.

Associate director Eugene Lim said that ERA's resale volume has dipped about 25 per cent to 30 per cent since the measures were introduced and sees resale prices adjusting downwards by 5 per cent to 8 per cent over the next six months.

One home buyer, Ms Angelyn Ho, 26, said that she and her fiance were waiting on the sidelines for prices to stabilise further. 'We are hoping resale flat prices will come down by about 10 per cent before we buy a flat near our parents in Bukit Panjang,' she said.

Turning to the supply of new flats, HDB said yesterday it will be launching 1,320 flats under its build-to-order scheme in Bukit Panjang and Sengkang on Tuesday.

A further 2,200 new flats will be launched in Yishun and Punggol next month and in December.

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