http://www.businesstimes.com.sg/arch...flash-20130907

Published September 07, 2013

COVs at lowest in over 4 years: SRX flash

Meanwhile, private non-landed property resale prices rise 1.5% to new high in August

By ong chor hao [email protected]


MORE realistic expectations appear to be kicking in, as the median cash over valuation (COV) for resale Housing and Development Board (HDB) flats fell in August to their lowest point in more than four years.

Flash data from the Singapore Real Estate Exchange (SRX) yesterday showed that this cash premium fell to $18,000, from $20,000 the month before. This is the lowest since July of 2009, when it was at $10,000.

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

A tighter mortgage servicing ratio (MSR) from the January cooling measures and the introduction of a three-year waiting period for permanent residents (PRs) in late August were cited for the decline in COVs.

Ong Kah Seng, director at R'ST Research, said that the more stringent MSR limited purchasing power. "In the face of persistent weakened demand, sellers are also more realistic in their asking COVs."

But analysts said that there remains demand for resale flats at good locations and with good attributes, and interest remains strong for this segment of the property market.

Perhaps reflecting this point, even as two out of three transactions for executive flats in Punggol were at prices below their valuation in August, the SRX report showed that the median COVs for executive units at Bishan and Serangoon were $120,000 and $116,500 respectively.

In the meantime, National Development Minister Khaw Boon Wan wrote on his blog yesterday that HDB was on track to deliver to Singaporeans the 13,600 new flats it committed to this year.

"Next year, HDB targets to complete and deliver more than 28,000 new flats, double this year's record," he wrote.

Even as COVs continue to fall, R'ST's Mr Ong sees it as a positive since they are an "optimistic value" and the ultimate aim of public housing is affordability.

Moves to temper demand for resale flats, as well as the recent expansion of housing grants for those looking at Build-to-Order (BTO) flats, should help that goal, he believes.

Overall, resale HDB prices slipped 0.7 per cent in August from the previous month to 149.7 on the resale index, the fourth straight month of decline.

Transaction volumes were flat, with 1,280 resale units expected to have moved in August, compared with July's 1,286 units.

Consultants do not foresee any surge in sales in the months ahead.

Mr Ong said that the MSR restrictions would prevent "over-aspirational demand", as most people rely heavily on loans to purchase property.

ERA's Mr Lim expects total resale transactions on the year to come in below 20,000 units, "which would be the lowest in the history of HDB resale".

Over in the private non-landed residential market, resale prices gained 1.5 per cent in August over July to reach a new high of 180 on the resale index.

All three regions - Core Central Region (CCR), Rest of Central Region (RCR) and Outside Central Region (OCR) - posted higher median prices. SRX estimates that 540 homes were sold, down slightly from July's 573.

Mr Lim said that buyers were turning to more affordable options of around $800,000 to $1 million. These are typically smaller units, which means they fetch a higher per square foot (psf) price. "With more higher psf price transactions, it explains why the indices have all increased."

As for the rental market, both the public and private sectors were fairly stable in August.

Median HDB rents are expected to stay flat at $2,400, with volumes dipping slightly to 1,560 units from the 1,604 in July.

As for private non-landed homes, SRX predicts that median rentals lost 0.1 per cent in August from the previous month to 132.6 on the rental index, with 2,980 transactions done compared with July's 3,015.