http://www.straitstimes.com/archive/...r-low-20130808
COVs for flats fall to 2 1/2-year low
Cash premiums for resale flats down to $20,000 as cooling measures bite
Published on Aug 08, 2013
By Charissa Yong
THE resale market for Housing Board flats showed further signs of being reined in by property cooling measures last month.
Chilled by tighter loan restrictions, cash premiums for resale flats continued their steady decline to a 21/2-year low.
Overall cash-over-valuation (COV) for Housing Board flats dropped to a median of $20,000, the lowest since the beginning of 2011, according to Singapore Real Estate Exchange (SRX) figures released yesterday.
There were 44 cases in July where flats were sold without any premium, compared to 14 in January. This capped off a 43 per cent plunge in the half-year since premiums peaked at $35,000 in January.
In the resale market, prices slipped 0.5 per cent - the third consecutive monthly drop.
Analysts attributed the declines to the January curbs on the proportion of income buyers can use to pay off their mortgage.
"With a smaller loan, their ability to pay high COV is clipped," said ERA Realty key executive officer Eugene Lim.
R'ST Research director Ong Kah Seng said the current COV level is more "moderate and realistic". "The COVs in prior years were too high," he said. "They were a result of positive buyers' sentiments in the absence of notable cooling measures. Such high COVs were not sustainable."
Mr Lim added that should COVs continue to drop, resale prices would be dragged down too. But lower premiums may also entice more to buy resale flats.
"Second time home buyers will find it more affordable, and they need not endure the long wait and numerous unsuccessful ballots for BTO units."
This has not played out yet. The large supply of Build-To-Order units - 25,000 will be launched this year - turned buyers away from resale flats, said DTZ Singapore research head Lee Lay Keng.
The number of resale flats sold last month stayed low at 1,270, similar to the 1,266 in June.
In contrast, the rental market was more buoyant. An estimated 1,760 public flats were rented in July, 13 per cent more than in the previous month.
Mr Lim and Mr Ong noted that it was cheaper to rent HDB flats than private apartments.
For example, a tenant looking for a two- or three-room flat with a monthly budget of up to $3,000 could not afford most private units, said Mr Lim.
More HDB flat owners who have bought private property are also holding onto their flats and renting them out, said Mr Ong.
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