Resale flat prices fall for second quarter in a row

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Resale flat prices fall for second quarter in a row

Index down 1.3% - sharpest quarterly drop since 2005

Published on Jan 03, 2014

By Charissa Yong


HOUSING Board resale flat prices continued to fall in the fourth quarter of last year, recording the sharpest drop in 81/2 years.

The resale price index declined 1.3 per cent - as prices slipped for a second quarter in a row - according to estimates released by the board yesterday.

Further, the fall was the sharpest quarterly drop seen since 2005, when resale prices plunged 4.8 per cent in the second quarter.

Analysts said the dip was expected. It followed a 0.9 per cent fall in resale prices during the previous quarter.

Tighter restrictions on home loans and ownership requirements, together with more new flats, continued to dampen demand.

Now, flat buyers may use only up to 30 per cent of their monthly salary to service a mortgage, so they are less able to afford larger, pricier homes.

Also, new permanent resident households must wait for three years before buying a resale flat.

Moreover, the large number of new flats has prompted more buyers to purchase directly from HDB.

All in, resale flat prices are likely to have fallen by 0.4 per cent over the whole of last year, said analysts.

This puts an end to the continued rise in resale flat prices seen in previous years, but a drastic and instant cut in prices has been avoided, said R'ST Research director Ong Kah Seng.

It "sets the stage for HDB resale prices to take the downward trend" this year, said PropNex chief executive officer Mohamed Ismail.

Both he and ERA Realty key executive officer Eugene Lim expect prices to drop by between 5 per cent and 8 per cent this year.

The news is good for buyers, more of whom could be drawn back to the resale market during the second half of this year, said Mr Ismail.

"As resale prices and cash premiums continue to decline, and the Government decreases the supply of new three-room and larger flats, we might see more buyers back in the resale market over the course of this year," said Mr Lim.

HDB will be cutting the supply of new three-room and larger flats this year to 18,600 units, down 18 per cent from 22,600 last year.

However, it will raise the number of new two-roomers in non-mature estates, from 2,600 last year to 5,000 this year, to cater to singles.

More detailed public housing data for the fourth quarter will be released on Jan 24.

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Published January 03, 2014

HDB resale flat prices seen falling further

Analysts expect 1-8% drop for this year despite pick-up in activity

By ong chor hao [email protected]


[SINGAPORE] Resale prices for Housing and Development Board (HDB) flats continued their decline in the last quarter of 2013, a trend which property consultants say is unlikely to reverse even by the end of this year.

They attribute this to a convergence of measures imposed to cool the market and a continued supply of new flats.

Flash figures released by the HDB yesterday indicated that the resale price index in the fourth quarter of 2013 was 202.1 (with 1998 being the base year when the index was 100).

This was a fall of 1.3 per cent from the third quarter's figure, and the second consecutive quarter of shrinking prices; the index dipped 0.9 per cent in Q3 2013, making that the first contraction since 2009.

Eugene Lim, key executive officer at ERA Realty, said that the decline was expected, given the market-cooling moves and supply of new flats.

For the year, resale prices are estimated to have contracted by 0.4 per cent.

That the decline in prices was marginal shows that there was an "on-going genuine demand" for resale flats at realistic price points and significantly reduced cash-over-valuation (COV), said Ong Kah Seng, the director at R'ST Research.

The median COV premium plunged from $35,000 last January to $8,000 in November, said the Singapore Real Estate Exchange (SRX).

Consultants are expecting last year's transaction volume to come in at below 20,000 units - the lowest since the turn of the decade, said PropNex Realty chief executive officer Mohamed Ismail. In the last five years, annual volumes have hovered between 24,000 and 37,000.

For this year, analysts generally agree that prices will continue to soften, though they expect activity to pick up later in the year. The expectation is for prices to fall by between one and 8 per cent for the year as a whole.

Mr Mohamed Ismail said: "I foresee this being a quiet year for the HDB resale market - similar to last year, which had seen the fewest deals in years."

At some point, however, sellers will eventually resist cutting prices further. On their part, buyers will get tempted away from the Build-to-Order (BTO) market as prices and COV continue to moderate, property consultants said.

The 18 per cent cut in supply of new three-room and larger flats this year to 18,600 units could send buyers into the resale flat market.

ERA Realty's Mr Lim said that he expects resale volume to rise 8 to 10 per cent over 2013's level, despite the overall expected decline in prices.

But Nicholas Mak, the head of research and consultancy at SLP International, noted that the overall supply of BTO flats targeted for this year is 24,300 flats - just 3 per cent lower than last year's 25,100 units.

"This will continue to weaken the HDB resale market as buying demand is drawn from the HDB resale market to the HDB primary market," he said.

Mr Ong cautioned that sellers cannot raise prices excessively even with improved demand, since the mortgage-servicing ratio cap essentially restricts buyers from borrowing more to finance their home.

Major policy changes from the government are unlikely, analysts said.

"As prices are declining gradually but consistently, the government is unlikely to introduce further measures, as it is not their intention to have government policies cause any significant price declines over a short period," said Mr Lim.

Mr Ong from R'ST said that it will not be necessary to loosen measures, since the government's intent was to encourage prudent buying; many owners putting their flats up for sale have seen prices appreciate over time, especially in the past few years.

"It doesn't really cause sellers to be in negative equity upon resale . . . even when prices fall in 2014," he said.

The resale price index for the full quarter and more detailed public housing data will be made available on Jan 24.