http://www.businesstimes.com.sg/arch...ol-q2-20140702

Published July 02, 2014

HDB resale flat prices continue to cool in Q2

By lee meixian

[email protected] @LeeMeixianBT


[SINGAPORE] Resale prices in the public housing market fell for a fourth straight quarter, down 1.3 per cent in Q2, according to HDB's flash estimates released yesterday. This follows a 1.6 per cent decline in the first quarter.

Property consultants invariably pinned the reason on recent cooling measures, particularly the reduction of the mortgage servicing ratio (MSR) cap to 30 per cent of borrowers' monthly income.

"This restrains buyers from taking excessive large loans and thus shrinks the pool of eligible buyers," said Ong Kah Seng, director at R'ST Research.

PropNex chief Mohamed Ismail added: "With smaller loans, some buyers can no longer afford to upgrade to larger flats."

Other government interventions that have curtailed resale activity include the lowering of the maximum mortgage loan term to 25 years, as well as a three-year wait imposed on new permanent residents before they can buy resale flats.

Coupled with a ruling allowing first-timer singles to buy new two-room build-to-order (BTO) flats in non-mature estates, the increased supply and reduced demand have continued to exert downward pressure on resale prices, Mr Mohamed Ismail said.

Mr Ong noted that resale prices have fallen a "mild" 2.8 per cent in the first five months of this year. They have also declined 5.1 per cent from the peak in Q2 a year ago.

Analysts expect prices for resale flats to continue falling in the second half - though not steeply, given sound economic fundamentals. The consensus is a price drop of 4 to 8 per cent for the whole of this year.

Mr Ong said: "The cooling measures have achieved their intended effect of enhancing affordability without creating significant price falls.

"Many owners who are putting up their flats for resale have already made paper gains over the years of holding, so (the drop in resale prices) doesn't really cause sellers to make losses upon resale."

The fates are not equal across districts, he believes. Better located flats in mature estates such as Bishan, Toa Payoh and Queenstown are expected to hold firm in their pricing as buyers of such flats tend to be more affluent and better able to withstand the impact of the MSR cap. Far-flung places such as Jurong West, Sembawang, Marsiling and Bukit Gombak are more likely to see greater price falls, he said.

Over the next three years, some 80,000 new BTO flats will be completed, with about 24,000 launching this year alone, noted Mr Mohamed Ismail.

Households moving to a BTO flat are required to sell off their existing flat six months prior to the move.

The imminent flood in supply of HDB resale homes from owners collecting the keys to their new BTO flats and private properties will further pressure resale prices, even though transaction volume may also improve slightly as a result, he added.

HDB will release more detailed public housing data for the full second quarter on July 25.