Prices of resale flats, private homes continue to rise

Prices of HDB resale flats have increased 2.9 per cent in the second quarter of this year compared to the previous quarter.

Flash data released on Friday by the Housing and Development Board (HDB) shows that its resale price index in the second quarter this year came in at 179.9.

The rate of price growth in the second quarter is higher than the previous quarter’s 1.6 per cent hike.

HDB said it is on track to offer 22,000 Build-to-Order (BTO) flats by September, and another 3,000 BTO flats in the last quarter of this year.

Prospective buyers can check the HDB website for details of the projects scheduled for sale from July to September.

Key Executive Officer of ERA Realty Network, Eugene Lim, said the higher increase in prices of HDB resale flats last year was due to a supply shortage.

He added that the pool of potential HDB upgraders may have shrunk with higher and rising private property prices. The recent cooling measures could be another put-off.

In particular, he pointed to stricter rules to qualify for loan financing as a reason for more HDB owners preferring to stay put.

Mr Lim said: “If you have an existing mortgage, you want to buy another flat before you sell, you are only eligible for a 60 per cent bank loan, so this puts off a lot of home sellers.”

Mr Lim said this trend has led to HDB owners postponing their plans to upgrade, with some subletting their flats for a good return instead after fulfilling the minimum occupation period of five years.

Also, Mr Lim said those that are able to afford to buy a private property after fulfilling the minimum occupation period of five years without selling their HDB flats; as they can sublet the whole unit and get a good return.

He said demand however, continues to be strong due to upgraders, downgraders, Permanent Residents and private property owners who have cashed out.

This has driven Cash-Over-Valuation (COV) upwards.

Based on ERA’s transactions for the last three months, Mr Lim said the median COV has risen from S$30,000 in April to S$37,000 in June.

To further enhance the supply for third quarter this year, HDB said it plans to launch 2,000 flats under a Sale of Balance Flats Exercise scheduled in August. HDB said this exercise will offer some flats in the mature estates.

While this is welcome news, analysts said the release of new flats will not have much impact on the resale market as the move caters primarily to first timers.

Meanwhile, private home prices have also continued to rise in the second quarter of this year, but at a slower pace compared to HDB flats.

Latest flash estimates from the Urban Redevelopment Authority (URA) showed the price index for private homes rose 1.9 per cent in the second quarter – slightly lower than first quarter’s 2.2 per cent increase.

And analysts see further price moderation down the road as buyers continue to remain cautious.

Colin Tan, Head of Research and Consultancy at Chesterton Suntec International, said: “At the moment, I think market sentiment has taken a hit because of the Euro debt crisis. The last time, the market suffered that kind of lack of interest was also in April last just when the Greek crisis started.

“But once the debt problem is resolved, then maybe we can see markets returning back again because other than that, the fundamentals haven’t really changed much.”

URA said the rate of price increase has moderated for seven consecutive quarters, since the fourth quarter of 2009.

Source : Channel NewsAsia – 1 Jul 2011

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