Home prices in Singapore are showing signs of moderating. Flash estimates from the Urban Redevelopment Authority and Housing and Development Board (HDB) for the last quarter of 2011 saw prices increasing at a slower rate.
Prices of resale flats grew by 1.7 per cent, compared to the 3.8 per cent growth seen in the third quarter. This brings the HDB Resale Price Index (RPI) – which provides information on the general price movements in the public residential market – to 190.4.
Meanwhile, private home prices rose by a marginal 0.2 per cent, down from the 1.3 per cent rise in the third quarter. The Private Residential Property Price Index stood at 206.2 at the end of the fourth quarter.
Market watchers said the softening in prices was expected.
The figures confirmed what the market had been expecting – a moderation in home prices following a year of policy tweaks by the government to cool the red-hot property market.
The price increase of resale flats slowed sharply in the last three months of 2011, following two straight quarters of more than 3 per cent growth.
Market watchers said home buyers are more cautious in light of the uncertain economic outlook.
And the ramped up supply of Build-To-Order (BTO) flats will continue to draw first-time home buyers away from the resale market.
In light of these two factors, some analysts expect HDB resale prices to correct by up to three per cent this year.
Eugene Lim, key executive officer of ERA Realty, said: “The success rate (for BTO applicants) is higher now, it is a lot better. In fact, any first timer that applies for a flat is almost certain of getting it. So with this improved success ratio, more and more buyers are crossing over to the BTO market and that translates into lower demand in the resale market.”
In 2011, HDB offered some 28,000 flats – 25,000 under the BTO system and some 3,000 units under the Sale of Balance Flats exercise.
For 2012, home buyers can look forward to 25,000 BTO flats.
HDB said “these projects will have a good geographical spread in the various towns”.
It will offer nearly 3,900 BTO flats in Choa Chu Kang, Punggol, Sengkang and Tampines in January.
Property firms said the cash premium that is paid upfront, also known as cash-over-valuation (COV), is showing signs of softening, dropping about S$5,000 to S$8,000 in the last quarter of 2011.
Experts said that COV is likely to continue dropping amidst the various housing policies, until it bottoms out at around S$20,000 to S$30,000. Short of an economic downturn, COV is unlikely to hit zero, as there remains a constant demand from PRs, downgraders and singles.
But market watchers point out that buyers now have more bargaining power.
Mohd Ismail, CEO of PropNex, elaborated: “In areas where the prices are very high, for example, in central locations, where the houses are valued currently at S$600,000, S$700,000. And these houses are on the low floor – assuming on the second floor – and they may also be affected by ethnic ratios.
“When such houses are put in the market, you don’t even get a buyer at zero cash-over-valuation. Therefore, if you ask, ‘are there possibilities of picking houses today without paying any cash?’ Yes, there are. But they may not have the best of the panoramic view and so on.”
In the private housing market, prices too have taken a hit following the slew of cooling measures. The rate of increase has continued to moderate for the ninth straight quarter, leading some to believe that the market is at a turning point.
Nicholas Mak, executive director of research and consultancy at SLP International, said: “The market prices are actually teetering on the edge of a decline and what it really needs is a factor, something to push it over the edge, and this could come in the form of macroeconomic factors such as an economic slowdown or some impending crisis.”
Private home prices are now at an all-time high, at 16 per cent above the previous price peak in 2008.
Source : Channel NewsAsia – 3 Jan 2012