HDB resale price index up 1.5% in Q4

PUBLIC housing resale prices have stubbornly continued to climb even as private home prices are accelerating downhill and pundits are betting on flat prices still holding firm this year if not seeing a modest single-digit growth, then staying level for the most part.

Flash estimates from the Housing and Development Board (HDB) showed that its resale price index grew by 1.5 per cent in the fourth quarter, after six quarters of robust growth of at least 3 per cent per quarter.

On the heels of this slower growth, ERA which has a 45-per-cent market share of the resale flat market predicts a “sub-1-per-cent increase” in resale prices in the first two quarters this year.

“If the (economic) recovery takes longer, we may see the price index flatten in the second half before decreasing if the situation worsens,” said ERA Asia Pacific associate director Eugene Lim.

PropNex chief executive Mohamed Ismail was even more bullish, expecting 3- to 8-per-cent growth this year. This would be slower than last year’s estimated 13.9 per cent overall increase in prices, but there would still be growth as demand exceeds supply, predicted Mr Ismail.

But one analyst found a certain “perversity” in the buoyancy of the resale market. Calling the 1.5-per-cent growth in the last quarter “alarming”, in light of the recession and gloomy outlook, Chesterton Suntec International research director Colin Tan asked “Why are people buying? Why are they paying a higher price despite the fact that their incomes may be affected in the future?”

As the market’s resale prices are factored into HDB’s pricing of new flats, the overall rise in the prices of public housing coupled with more expected job losses ahead could work out adversely for prospective buyers, he said.

Nonetheless, prices should be tightly reined in by an almost zealous reluctance by buyers now to fork out cash above valuation (COV). “The days of transactions with above $50,000 COV are over,” said Mr Lim.

With further economic contraction expected, buyers have become “very practical”, he said “Most start by making offers below valuation, and invariably, most deals today are closed at valuation, or at most $5,000 to $30,000 over.”

What most of the property players Today spoke to agree on, is that smaller flats three- and four-room units will benefit from strong demand.

Mr Ismail expects prices of three- and four-room flats to grow by 5 to 8 per cent, and larger flats to post increases of 1 to 3 per cent. “There will be more downgraders and cautious home buyers in the wake of retrenchments and tighter budgeting,” he said.

Mr Victor Ong, 29, of Huttons RealEstate Group, said foreigners, too, were eyeing smaller units.

The resale price index for the full quarter, as well as more detailed public housing data and upcoming new flat supply, will be announced at the month’s end.

Source : Today – 3 Jan 2009

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