Home prices in Singapore continue to soften

Property watchers have said the bull run experienced by Singapore’s housing market may have reached its peak.

Latest data showed that home prices continue to soften and transaction volumes have dropped.

24,633 public flats changed hands last year, a 24 per cent drop in volume over 2010, and the lowest resale volume in the past 10 years.

The Housing and Development Board (HDB) said the average annual resale transaction volume in the past decade was about 30,000 flats.

Meanwhile, 15,904 private residential units were sold by developers, down 2.4 per cent from the previous year.

Government measures to dampen demand and raise the supply of new homes have taken much heat out of the public housing resale market.

Property watchers said the increase in the minimum occupation period of HDB flats to five years, the 60 per cent loan cap for second mortgages, and the rule requiring home owners to sell off their private property before they are allowed to buy an HDB flat have dampened demand.

Prices rose by about 10.7 per cent in 2011, compared to 14 per cent in 2010.

Prices increased at a slower rate, mostly because the cash premium that is paid on top of a home’s valuation, known as cash-over-valuation (COV), has been on the decline.

Mohd Ismail, CEO of PropNex, said: “…in the last couple of years, COV has been on the upward trend and when the economy was doing extremely well, it was common for people to ask for COV above S$50,000 on average. But lately in the last few quarters, we are seeing a dip in the COV.

“Public housing has already hit an all-time high of record prices, in terms of its valuation, so it has given less motivation for buyers to keep giving higher COVs.”

PropNex expects COV to go down further, by between S$10,000 to S$15,000 this year, amidst the more cautious buying sentiments due to an uncertain economic outlook.

PropNex’s figures showed that COV dipped by eight to 15 per cent across the various housing types in the last three months of 2011, compared to the third quarter. Mohd Ismail said that COV has dropped by a further 5 per cent in January.

He added that the ramp up in supply of HDB flats through the Build-To-Order (BTO) scheme has also drawn demand away from the resale market.

HDB plans to release another 25,000 BTO flats this year. 4,110 new flats will be offered in March under the BTO scheme. They will be located in Bedok, Bukit Batok, Bukit Panjang, Clementi, Geylang and Toa Payoh.

For example, the median COV for a three-room flat in Jurong East dropped S$8,000 in the last quarter – a 25 per cent dip from the third quarter.

Those that bucked the trend were typically the bigger units in mature estates. The COV for a five-room flat in Kallang/Whampoa went up by S$10,000, or an 18 per cent jump.

Property watchers said this is unsurprising as units in mature estates remain a popular choice with buyers.

Parliament will sit next month to debate the Budget, and National Development Minister Khaw Boon Wan is expected to announce changes to the balloting rules for BTO flats, to benefit second-timers.

Property watchers said the impact of such a measure on the resale market could be significant, as second-timers form the bulk of resale flat buyers.

Meanwhile, private homes prices have also softened – rising 5.9 per cent in 2011, compared to the 17.6 per cent increase seen in 2010.

In the last quarter alone, prices of semi-detached homes dropped 0.6 per cent.

Nicholas Mak, executive director for research and consultancy at SLP International, said: “The decline in semi-detached property prices could actually be the first crack in the bull run that we have seen in the past two-and-a-half years.

“With the global macroeconomic situation and also the widely anticipated slowdown in the local economy, the Singapore private residential property prices are showing signs that it is reaching a peak, and I think going forward, we could see prices plateau, and likewise for rental.”

Property watchers said private home prices are likely to drop by 10 to 15 per cent this year.

Source : Channel NewsAsia – 27 Jan 2012

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