HDB resale prices at record high

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http://www.businesstimes.com.sg/sub/...56051,00.html?

Published October 24, 2009

Real Estate

Premium for HDB resale flats soar in Q3

Resale prices and volume also increase from the previous quarter

By EMILYN YAP


SELLERS of HDB flats have regained pricing power as demand for homes shows little sign of letting up.

According to the Housing and Development Board yesterday, the median cash-over-valuation (COV) for resale transactions quadrupled from Q2 to Q3 this year - from $3,000 to $12,000.

This premium, which buyers have to pay for HDB flats, had fallen in the six previous consecutive quarters from Q1 2008 as the economy slowed.

Except for one-roomers, all flat types registered an increase in median COV in Q3 this year. Notably, five-room and executive flats commanded median COVs of $10,000 and $9,000 respectively, whereas most were unable to command any premium in the preceding quarter.

Some of the highest COVs in Q3 were in Yishun. For four-room, five-room and executives flats in the area, buyers had to fork out median premiums of $17,000, $20,000 and $19,000 respectively.

Nevertheless, compared with a year back, Q3's median COV of $12,000 was lower - down 37 per cent from $19,000 then.

As COVs soared from Q2 to Q3, the proportion of resale deals transacting over valuation also increased, from 57 per cent to 79 per cent.

According to ERA Asia-Pacific, COVs are still increasing, though at a slower pace. 'We estimate the median COV for Q4 to be $15,000-$18,000,' said ERA associate director Eugene Lim.

Robust demand for HDB flats was also reflected in higher resale prices. HDB's resale price index grew 3.6 per cent from Q2 to 145.2 points in Q3 - a record since 1990. This figure exceeded a flash estimate of 144.7 points, or a 3.2 per cent rise.

Some of the most expensive units were in Queenstown, where five-room and executive flats went for a median $619,000 and $712,500 in resale transactions.

Mr Lim expects resale prices to continue growing. 'However, COVs demanded by sellers are hitting resistance levels, as the economy is just starting to improve,' he said. 'We may possibly see a price increase of about 2-3 per cent for Q4.'

While rising prices are depressing for public home seekers, they spell good news for existing owners, says PropNex CEO Mohamed Ismail.

'This is a prime opportunity for them to upgrade their property or simply to gain cash from selling their existing flats,' he said. 'This is especially so for owners who bought their flats during the previous peak in 1996.'

The emergence of more HDB upgraders could keep the private home market afloat. According to market watchers, these buyers were critical in reviving sales from the start of the year as they flocked to mass-market condominiums.

Strong HDB resale volumes underpinned the rising prices. The number of deals in Q3 was 11,649 - up 14 per cent from Q2. According to ERA, this could be the highest quarterly volume since Q4 2004, when 11,562 units changed hands.

PropNex notes that 28,279 resale transactions took place in the first three quarters of the year - just 140 fewer than in the whole of 2008.

In addition, the proportion of deals involving five-room and executive flats has grown in each quarter this year. 'This increasing popularity for larger flats reflects greater market confidence,' Mr Ismail said.

According to HDB, total flat supply this year will be about 13,500 units. Around 4,000 build-to-order flats will be available at Punggol, Bukit Panjang, Sembawang and Dawson in the next two months.

HDB said that it is 'monitoring the demand situation and will adjust its building plan accordingly to ensure an adequate supply of new flats'.

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http://www.straitstimes.com/Prime%2B...ry_445880.html

October 24, 2009 Saturday

HDB resale prices at record high

Up 3.6% in Q3, with 11,649 units sold; cash top-ups also soar

By Jessica Cheam


PRICES of resale Housing Board homes have continued their relentless climb, rising another 3.6 per cent in the third quarter to hit a fresh record.

But despite the high prices, demand for resale flats remained hot. A total of 11,649 homes changed hands in the third quarter, reaching a level not seen in five years.

The latest figures, released by HDB yesterday, highlight another important trend. Almost 80 per cent of resale flats were sold above their bank valuations.

And this amount, known as the 'cash-over-valuation' (COV) - or the cash top-up payable by buyers - quadrupled from a median of $3,000 in the previous quarter to $12,000.

Together, the numbers show that resale HDB flats are not just becoming more expensive, but homeowners have to fork out more cash to buy them.

Analysts said yesterday that the feverish buying activity had been fuelled by recent positive economic sentiment, and also some panic buying.

Chesterton Suntec International's research and consultancy director Colin Tan said that with resale prices surging upwards, more people are buying earlier in anticipation of more price increases.

'The problem is, many buyers put off their purchases during the height of the recession. As resale prices start to run up, panic sets in and buyers, including PRs, start to buy at all costs, which adds further to the demand,' he said.

COVs have been on a see-saw ride for the past two years. During the 2007 property boom, the median cash top-up for all flat types hit a record $22,000 in the fourth quarter, driving many home seekers to queue for new HDB flats.

Then, as the global recession tightened its grip on the economy, prices fell faster than bank valuations of flats.

Cash top-up values came down to almost zero and just a quarter ago, close to half - 43 per cent - of all sales were done at or below valuation.

Now, it seems the days of low cash top-ups are over and ERA Asia-Pacific associate director Eugene Lim believes they will continue to rise in the short-term.

'We estimate the median COV for next quarter to be $15,000 to $18,000,' he said.

The rising cash top-up figures were confirmed by HDB data, which shows them spiking in popular areas such as Marine Parade and Yishun, reaching a median of $20,000 for five-roomers.

Analysts said rising prices - they have risen 4.2 per cent since the beginning of the year - and cash top-ups will drive young couples back to the queue for new HDB flats, especially those who are cash-poor.

Prices 'unlikely to ease'

And this will put even more pressure on the Government to quickly supply new units to meet burgeoning demand.

HDB recently addressed the problem by announcing the release of 7,000 new flats from October to December.

It added yesterday that it will offer 4,000 flats under its build-to-order scheme in Punggol, Bukit Panjang, Sembawang and Dawson in the next two months. It recently launched 1,200 new flats in Sengkang and Jurong West, which have attracted 3,007 applicants to date.

The release of these new flats could help to ease the rise of resale flat prices somewhat, said some analysts.

But others like ERA's Mr Lim also felt that the new supply would have minimal impact on resale prices. He noted that most buyers in the resale market either do not qualify for new flats (like singles and PRs) or qualify but are unwilling to wait three years for them to be built.

This is why industry observers expect resale prices to continue to rise.

PropNex chief executive Mohamed Ismail thinks prices will likely rise another 2 to 3 per cent over the next quarter.

But while HDB's latest figures may 'fuel the ire of those who bemoan high COVs', Mr Ismail says the data brings good news to existing HDB owners.

'This is a prime opportunity for them to upgrade their property or gain cash by selling their flat - especially those who bought at the previous price peak in 1996,' he said. 'Their property assets would now see positive cash flow.'

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