Prices of resale flats to remain high this year: analysts

Property analysts expect resale prices of public housing flats to remain high this year, after trending up by 2.5 per cent in the fourth quarter of 2012.

But they said prices could start to weaken in 2014 to 2016 as over 8,000 units of resale flats could be available in the market.

G.Sharmene and her family are expecting to move into their new executive condominium (EC) unit at Austville Residences early next year. But they have already sold their public housing flat to cash in on the high property prices.

Under current rules, they have to sell the flat within six months from getting the Temporary Occupation Permit to their new EC unit. The family is now renting an executive apartment for S$2,900 a month until their new home is ready.

She said: “I first bought my flat in 2007. At that time I bought it directly from HDB and is a five-room flat which I only bought it for S$188,000 and just right after five years, I did my valuation, it was about S$480,000.

“I was told that the market for lower floor was not very good, we just decided to market the house and see how it goes, at that time there was an offer for S$503,000, which was S$30,000 above valuation, the highest at that time in Sengkang so we decided to go for it and sell. We were also worried about 2013 prices starting to cool down.”

She added that the family will channel sale proceeds to fund their purchase of the EC unit.

Dennis Wee Group estimates that up to a total of 2,600 resale units could become available from 2014 to 2016 as HDB upgraders move into the new executive condominiums, while second-time buyers moving to new Built-to-Order and Sale of Balance Flats could inject another 5,900 resale flats into the market by 2016.

Under the Build-To-Order (BTO) system, eligible buyers can apply for flats in their preferred location from the specific sites launched by HDB.

HDB’s Sale of Balance Flats exercise consists balance flats from earlier Build-To-Order exercises, surplus Selective En-bloc Redevelopment Scheme (SERS) replacement flats and repurchased flats.

HSR’s special advisor Donald Han said: “We are going to have a slew of record supply completing from 2014 onward which will have an impact in terms of “rentability” because we are entering into a market of tightening labour and immigration conditions. With more completion of BTOs, private condo as well as ECs that will be completing from 2014 onward, that might have a downward pressure on rentals which have an impact in capital value, especially affecting your HDB prices.

Some analysts said HDB resale prices could climb by 5 per cent this year as the supply of units remains tight. They added that the median cash-over-valuation (COV) could to breach the record high of S$36,000 set in the third quarter of 2011.

According to the Singapore Real Estate Exchange (SRX), the median COV rose by over 13 per cent to S$34,000 in October and November last year.

COV is a cash premium paid to the seller over the market valuation of the property.

Some analysts have suggested ways to keep COV in check.

Senior manager for research and consultancy at Dennis Wee Group, Lee Sze Teck, said: “If you want a drastic measure, they could stop the whole COV issue which means HDB flats have to be sold at valuation price. More moderate measures could include taxation on the COV they collected from the sale of flat. Another way is to relook at how HDB flats are being valued, we could follow the private market where the selling price is being agreed upon and then the buyer will go to the banks and ask if the banks can match the price. If they can, then that would be the price being sold.”

Analysts said they’ve already noticed some resistance in paying high COV in 2012. And they expect resale activity to slow if COV continues to rise.

Source : Channel NewsAsia – 8 Jan 2013

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