HDB resale flat prices up

Private home prices increased at slower rate in third quarter.

In defiance of the expected economic slowdown, prices of the HDB resale flats and private residential properties continued to march upward. 

And while private home prices increased at a slower rate in the third quarter - compared to the previous quarter - prices of HDB resale flats went up by 3.8 per cent between July and last month, compared to 3.1 per cent between April and June.

This, as the number of resale flat transactions fell by about 10 per cent, from 6,581 cases in the second quarter to 5,903 cases in the third quarter. 

According to HDB's data released yesterday, the Resale Price Index has risen from 180.3 in the second quarter to 187.2 in the third quarter - an all-time high since HDB began tracking resale prices in 1994. 

ERA Realty key executive officer Eugene Lim noted that the index has increased 11.6 per cent since the third quarter last year. Mr Lim attributed the falling number of resale flat transactions to "the lack of supply and high prices" which have made it "more difficult to conclude deals".

He said: "Demand in the resale market continues to be strong; and they are coming from first-timers and families that have immediate housing needs, singles, PRs, up-graders and down-graders. These buyers make up almost 80 per cent of the resale market."

Mr Lim reiterated that the rising prices were accentuated by the cash-over-valuation (COV) demanded by sellers. "They are able to do this as supply is tight and demand is strong," he added. 

According to HDB's data, COV ranged from S$29,000 for a three-room flat in Woodlands to S$68,00 for an executive flat in Tampines.

SLP International executive director of research and consultancy Nicholas Mak noted that the number of resale transactions is the lowest since the first quarter of 2004. 

"Home owners are not offering their flats for sale and are keeping it for rental instead," said Mr Mak.

Dennis Wee Group director Chris Koh added: "If you own a HDB flat and a private property, you won't want to sell the HDB flat because the next time you buy a HDB flat, you'll need to sell your private property. And for those who have just finished their minimum occupation period (MOP) and are upgrading to a private property, they will just rent the flat and move into the private property."

The number of HDB flats approved for subletting increased to about 39,100 units in the third quarter - up from 37,900 units in the second quarter. According to the HDB, subletting transactions fell from 7,177 cases in the second quarter to 6,549 cases in the third quarter. 

PropNex chief executive Mohamed Ismail felt the resale flat prices will continue to rise in the next quarter. 

But beyond that, he expects prices to stabilise with the new Build-to-Order flats that HDB will be introducing this year and next. This would draw more first-time buyers away from the resale market, he added.

Mr Mak pointed out that if the number of resale transactions continue to hover below 7,000 flats for the next "one or two quarters", the rate of increase of resale prices will slow.

Source: Today by Ong Dai Lin Oct 29, 2011