Resale flat prices increase, but COV premiums drop 9% in Q1

The price of resale flats went up in the first quarter of 2011, but Cash-Over-Valuation premiums fell to S$21,000 – a 9 per cent drop from the previous quarter, according to data from the HDB.

Observers attribute the lower COV premiums to the government’s cooling measures which took effect in the first quarter of this year.

Going forward, analysts have mixed views on the outlook for COV premiums.

“Currently the COVs have come to a point where it is not going any much lower. Based on our PropNex data, the COV for the month of April has already gone up to a median at S$23,000, which is where we were starting prior to the first quarter,” said PropNex CEO Mohamed Ismail.

For the first quarter of 2011, the price of resale flats rose 1.6 per cent.

This is higher than the 2.5 per cent increase in the previous quarter.

Meanwhile, median sublet rents in Q1 remained relatively stable with increases from 1-room and 5-room flats and decreases from 2-room flats.

Subletting transactions rose by 8 per cent to 6,365 cases.

Some analysts believe COV premiums will likely continue to fall as a result of new supply coming on stream.

Separately, HDB said it will launch another 3,185 flats in Hougang, Sembawang, Sengkang and Punggol for sale under the April 2011 Build-to-Order BTO exercise.

This will bring the total supply of new BTO flats this year to 22,000, compared to the 16,000 BTO flats that were offered last year.

“I think the fact that there’s going to be 22,000 new HDB dwellings up in the marketplace, and the government’s ramping up in terms of its development missionary to develop more HDB properties…will mean vendors cannot hold on to their COV asking prices,” said Mr Donald Han, vice chairman of Cushman and Wakefield.

Despite the supply of new flats, Mr Han believes there could be a one to two per cent uptake in HDB resale prices in the next one or two quarters.

Mr Ismail also thinks the resale prices will trend up, as new supply of BTO flats are not a perfect substitute for the resale units.

Source : Channel NewsAsia – 25 Apr 2011