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Headwinds expected to continue for HDB resale flats: consultants

By Mindy Tan

[email protected]@MindyTanBT

Oct 2, 2015


THE resale prices of Housing & Development Board (HDB) flats are likely to continue to face headwinds despite the slowing depreciation of the resale price index which seems to indicate growing stability in the public housing market.

The HDB Resale Price Index dipped 0.3 per cent in the third quarter of this year, the smallest drop since the index started to fall in Q3 2013, according to the flash estimate for Q3 released on Thursday.

But the recent increase in the income ceiling for new HDB flat applicants is expected to boost the demand for Build-To-Order (BTO) flats, while the Mortgage Servicing Ratio (MSR) implemented in August 2013 is likely to keep resale prices down, say consultants.

This is compounded by the slew of new flats hitting the market.

HDB said it will offer about 7,000 BTO flats in Bidadari, Bukit Batok, Choa Chu Kang, Hougang, Punggol Northshore and Sengkang in November. In addition, about 5,000 flats will be offered in a concurrent Sale of Balance Flats exercise.

Said SLP International's executive director Nicholas Mak: "The mega launch . . . could potentially draw buyers away from the HDB resale market. Hence, in the short term, the downward pressure on HDB resale prices is expected to continue, unless the government were to ease the cooling measures."

Other consultants point to the MSR as the limiting factor given that as long as the cap is in place, sellers cannot raise prices since buyers cannot get large property loans.

ERA's key executive officer Eugene Lim said he expects overall resale prices to soften by around 2 per cent for the whole of 2015. And while the Proximity Housing Grant is unlikely to affect pricing much in the short term - given that buyers simply are unable to offer a higher price due to the MSR - it will likely have the effect of increasing resale HDB transactions over time as more buyers make use of it to move nearer to their loved ones, said Mr Lim.

Said Lee Nai Jia, associate director, regional head (SEA) for research, DTZ SEA: "We see a pickup in activity in transactions in Q2 and early Q3, as sellers become more flexible. More buyers were entering the market as prices have stabilised. Generally, there are more buyers than sellers then."

Ong Kah Seng, director at R'ST Research agreed that the ground trend suggests that buyers seem more accepting of asking prices. But this, he says, is in part also due to sellers being more realistic about their asking prices.

With the increased number of private homes, executive condominiums and BTO flats completed in recent times, the key concern of sellers is to at least break even, he says.

Looking ahead, Mr Ong said he expects prices to remain flattish in Q4, translating to a yearly price fall of up to 2 per cent for resale flats.

"Also, (I) will expect more four-room and five-room HDB flats to be put up for resale in 2015 and 2016, as there will be (an) increase in private residential properties completion, and substantial ECs completing. Four-room and five-room flat owners tend to form the majority of HDB upgraders," he said.

PropNex Realty CEO Ismail Gafoor said he expects HDB resale prices to soften about 3 per cent for full-year 2015, with volume hitting around 19,000 to 20,000 units due to the lower asking prices.