HDB resale prices seen to drop 3-5%

Resale prices of public housing in Singapore have risen rapidly in recent years but market players said those days are over.

Speaking at an industry forum on Wednesday, they said resale prices of HDB flats will drop by three to five per cent this year.

But the drop may be more severe, if the external environment takes a turn for the worse.

Executive condominiums such as the Trilliant in Tampines have stirred interest among home buyers.

The promise of more such units in the market as well as some 25,000 new flats to be offered under the government’s Build-To-Order (BTO) scheme this year is expected to ease the demand for resale flats.

ECG Property’s managing director Shawn Tan said: “We should be seeing a more sit-back-and-wait attitude from citizens. They will be expecting more flats to be built and they have more options to go for the BTOs and walk-in selections directly from HDB.”

At Wednesday’s industry forum, CEOs of several property agencies said demand is also likely to soften with tighter immigration rules, which will reduce the pool of potential home buyers.

They expect resale flat prices to fall by three to five per cent this year, and up to 10 per cent if the eurozone debt crisis triggers a global recession.

HSR Property Group CEO Patrick Liew said: “Unless the economic situation changes, unless we see a lot more foreign direct investment coming in…I think the HDB market will remain flat for the next one to three years.”

PropNex CEO Mohamed Ismail said: “Public housing resale prices have gone up by over 80 per cent in the last five years…people going in to pick up (units) at high prices and expecting such appreciation in the near future or next five years — it is definitely not likely (to happen).”

Market players noted HDB resale prices have reached a peak. This could put some pressure on cash premiums or what’s more commonly known as cash over valuation (COV).

ERA key executive officer Eugene Lim said: “The COV is already stabilised at between S$30,000 and S$40,000.

“If there is any shift in government policy and with the continued increase in public housing prices, we are likely to see COV amount go down further.

“Coupled with externalities that will cause a shock in our economy, if you use the last downturn as an example, then COV will be even zero or they will sell below valuation.”

Industry players expect HDB resale prices to continue to moderate.

Some said prices are likely to rise by just 10 per cent over the next five years compared to the over 80 per cent increase seen in the last five years.

In addition, a potential tweak in balloting rules that will set aside more units for second-time buyers of HDB flats is also expected to affect the the resale flat market.

Currently, five per cent of new project launches are reserved for this group of buyers.

Source : Channel NewsAsia – 8 Feb 2012

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