HDB resale prices fall for first time in 8 years

SINGAPORE — Resale prices for Housing and Development Board (HDB) flats fell last year by 0.6 per cent, compared to 2012 — the first annual decline in eight years.

And in a further reflection of a market chilled by several rounds of cooling measures, HDB statistics released yesterday showed that there were only 18,100 transactions involving resale flats last year, almost 30 per cent fewer compared with 2012, and the lowest since the HDB started collecting the data in 1997.

Cash-over-valuation (COV) premiums, which hit five figures in several estates last year, have also come down significantly.

For example, median COV for a resale four-room flat in Sengkang was S$3,000 in the fourth quarter of last year, compared to S$35,000 in the fourth quarter of 2012. Over the same period, the median COV for a four-room resale flat in the mature estate of Ang Mo Kio fell from S$40,000 to S$15,000.

Analysts cited the ramped-up supply of Build-To-Order (BTO) flats last year, the requirement for permanent residents to wait three years before they can buy resale flats, as well as the measures to encourage financial prudence — such as the Mortgage Servicing Ratio cap of 30 per cent and other loan curbs — as the reasons for the slump in transaction volume and the fall in prices.

The HDB’s latest data showed that resale prices fell by 1.5 per cent in the fourth quarter of last year, compared with the previous quarter — marginally higher than the flash estimate of 1.3 per cent released earlier this month.

The analysts said that while they expect HDB resale prices to continue to head south in the next few months, the trend could be reversed by a rush of buyers trying to cash in on the low COV premiums.

ERA Key Executive Officer Eugene Lim noted that home hunters who do not qualify for BTO flats, or are unwilling to wait for new flats to be built, may be attracted to enter the resale market.

“We may expect a pick-up in transaction volume possibly after the Chinese New Year festivities,” he said. “Transaction volumes in March, April and May are likely to set the pace for the rest of the year.”

Mr Lim also said that with the tight labour market and the improving economy, HDB resale flats will continue to command prices above valuation.

PropNex Realty CEO Mohamed Ismail said he expects HDB resale prices to dip by between 5 and 8 per cent this year. “We are expecting COVs to continue to moderate,” he said. Nevertheless, he added that some flats, particularly those in mature estates and in good locations, will still command reasonable premiums.

Mr Chris Koh, Director of Chris International, felt that HDB resale prices will stabilise in the second half of the year.

“By the middle of this year, when prices consolidate, we should see buyers coming back to the market again,” he said.

Offering a different view from the other analysts, Mr Colin Tan, Director of Research and Consultancy at Suntec Real Estate Consultants, said that it was uncertain whether HDB resale prices would continue to decline across the board.

Citing the sharp fall in COV premiums in Sengkang, he said this could be due to a batch of owners selling their homes after completing their five-year minimum occupation period.

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