http://www.businesstimes.com.sg/arch...ws-q1-20130402

Published April 02, 2013

Growth in prices of resale HDB flats slows in Q1

Analysts point to cap on Mortgage Servicing Ratio as one key factor

By ong chor hao


[SINGAPORE] Resale HDB flat prices grew at the slowest pace in a year in the first quarter of 2013, initial data showed, as demand adjusted to a slew of property measures.

The Resale Price Index (RPI) grew 1.2 per cent to 205.4 from the previous quarter, when it rose 2.5 per cent, the flash estimate from the Housing & Development Board (HDB) showed yesterday.

This is the slowest rate of increase since the first quarter last year, when the index gained 0.6 per cent, HDB said.

Mohamed Ismail, CEO of PropNex Realty, said: "The HDB resale prices are beginning to show signs of moderation as witnessed by the more than 50 per cent drop since last quarter."

Analysts pointed to Mortgage Servicing Ratio (MSR) limits introduced in the January cooling measures as one key factor.

The Monetary Authority of Singapore set a cap on the MSR for HDB housing loans granted by financial institutions at 30 per cent of gross monthly income. For loans granted by HDB, the cap was lowered from 40 per cent to 35 per cent.

"This limits the buyers' purchasing budget for resale flats, especially for the larger flats such as 5-room flats and executive flats," said Nicholas Mak, head of research and consultancy at SLP International.

Mr Mak said the large supply of BTO flats and executive condominiums also diverted some interest from the resale market.

The HDB has said it will supply around 25,000 BTO flats this year. Last year, it launched more than 27,000 units. It has released more than 7,200 BTO flats so far this year, and promised another 7,850 homes under a concurrent BTO and Sale of Balance Flats exercise in May.

The weaker growth for Q1 was also partly due to subdued demand from singles, who have held back since the second half of last year on hopes that they can qualify for new BTO flats, said Ong Kah Seng, director at R'ST Research.

Last month, singles with monthly incomes up to $5,000 were allowed to buy 2-room BTO flats in non-mature estates starting from July. With the clarity, Mr Ong expects renewed interest from more affluent singles for resale flats, due to a general lack of new shoebox apartments.

But the supply pipeline could remain choked.

Christine Li, head of research and consultancy at OrangeTee, noted that it has been clarified that singles do not qualify for concessions on additional buyer's stamp duty (ABSD). Also, permanent residents now face higher ABSD and have to sell their HDB flats within six months of buying a private home. Both factors could restrict supply, she believes.

PropNex sees median cash-over-valuation (COV) at around $32,000 and resale prices around $451,000 for Q1, roughly in line with the latest Singapore Real Estate Exchange (SRX) data for February. They had fallen 8.6 per cent and 2.2 per cent respectively in February over January, SRX data showed.

SLP's Mr Mak believes COVs will stabilise at $27,000-$30,000 after declining in March and April. COVs for larger flats will be hit first, but the MSR cap could shift demand to 3-room and 4-room flats.

For 2013, consultants expect resale flat prices to grow 3-7 per cent. The worst-case scenario mooted was a dip of up to 3 per cent. Last year, prices rose 6.6 per cent.

R'ST's Mr Ong believes demand will be supported by buyers who urgently need a home, do not qualify for BTO flats, or are "investor-occupiers" - owners who want to rent out rooms to defray holding costs.