http://www.businesstimes.com.sg/real...ice-cycle-soon

HDB resale prices expected to reach bottom of price cycle soon

By Lynette Khoo

[email protected]@LynetteKhooBT

Jul 25, 2015


WITH final figures from the Housing & Development Board (HDB) confirming a 0.4 per cent drop in HDB resale prices here in the second quarter, property market watchers believe that the public housing market is on track to reach the bottom of the price cycle soon.

The price fall during the second quarter was most moderate across the eight straight quarters of decline and followed a one per cent drop in resale prices during the first quarter.

Lower prices has drawn buyers, with resale transactions jumping 27.8 per cent quarter-on-quarter to 5,286. In particular, the number of resale four-room flats transacted in the second quarter leapt by 31.8 per cent from a quarter ago to 2,120 while the number of five-room flats transacted grew 30.8 per cent to 1,210.

"We continue to expect resale prices to fall for the next two quarters of the year, but prices may have reached a 'bottoming-out' level," said Mohammed Ismail, CEO of PropNex. "While activity was slow in the first quarter, transaction volume picked up in the second quarter as lower prices may have enticed buyers back into the HDB resale market - more buyers may buy resale flats instead of build-to-order (BTO) due to the waiting time for completion," he said.

SLP International executive director Nicholas Mak noted that a slower rate of price decline and an increase in resale transactions could be signs that the HDB resale market is "achieving a soft landing to reach the bottom of the price cycle".

"However, macro-market factors that caused the price weakness are still present. Hence the HDB (Resale) Price Index is still expected to continue to contract in the short term," he said, expecting resale flats to fall by up to 3.5 per cent for the whole year compared to the 6 per cent fall last year. "If the government continues to gradually reduce the supply of BTO flats, which would contribute to the increase in the HDB resale transaction volume, the HDB resale prices could start to increase in the second half of next year," he said.

HDB offered a total of 13,426 flats in the first half of this year comprising 8,039 BTO flats and 5,387 balance flats. In the upcoming September BTO exercise, HDB will offer about 4,860 flats in Bidadari and Punggol Northshore. Another 4,000 flats will be offered in a concurrent Sale of Balance Flats exercise.

On the HDB rental market, data from HDB shows that the number of applications approved for subletting of HDB flats rose 1.2 per cent during the second quarter to 10,510. As at June 30, the total number of HDB flats being sublet was 49,480 units, an increase of 2.4 per cent over the first quarter.

ERA Realty key executive officer Eugene Lim, who is expecting stable resale volumes this whole year to tally up to 18,000-20,000 flats, believes that rental demand for HDB flats will remain strong in the months ahead. "As HDB flats have been traditionally popular with their low quantum and high accessibility, it is expected that they are in demand," he said. "This is especially so for flats going for below S$2,500 a month, as there are no close substitutes for them."

Mr Mak of SLP, however, cited potential rental pressures on HDB flats from the recent move by the Ministry of Manpower to raise the minimum monthly salary bar for foreigners to S$5,000 (up from S$4,000) before they can apply for visas for spouses, children and parents from Sept 1. This, he reckoned, would ease the rise in HDB subletting volumes. "Based on the latest figures, foreigners holding Employment Passes and S Passes made up about 7 per cent of the total households in Singapore, which is a fairly significant proportion," Mr Mak said.