PRICES of Housing Board (HDB) resale flats are expected to hold up as supply is tight but sales volumes could soften as buyers assess their options in the light of new cooling measures.
Experts say a stand-off between buyers and sellers is likely over the coming weeks as the stamp duty rules sink in. They believe most buyers will take a wait-and-see attitude, with some holding off purchasing a resale flat in anticipation of private home prices falling.
HDB resale prices rose 3.8 per cent to a record in the three months to September and are now 35 per cent higher than in the fourth quarter of 2009 - the last time prices fell. Resale prices then dipped just 0.8 per cent before rebounding and heading north again.
But while HDB resale prices are correlated to how values move in the private mass market, they are likely to be more insulated from the stamp duty measures as many buyers, unlike in the private market, are first-timers and owner-occupiers rather than investors or foreigners.
Analysts do not expect the public market to be overly affected unless private home prices fall 'significantly'.
But even if private home values drop by 15 to 20 per cent next year, HDB resale prices might dip by a more moderate 5 to 10 per cent instead.
There is enough demand for such homes... Even though HDB housing supply has been ramped up, these flats have not entered the market yet as they are either still being built or serving out their minimum occupation period.
Mass-market home prices to ease by between 5 and 10 per cent next year, which could lead to HDB resale prices dipping 3 to 5 per cent in tandem. Even during the global financial crisis, the HDB market was still manageable with sales activity remaining healthy.
While HDB resale volumes might come off slightly, prices are expected to remain stable or dip slightly... But I would expect the HDB resale price index and cash-over-valuations paid to start coming down by the first quarter of next year.
Any dip in prices is likely to occur only in the second or third quarter of next year.
If sales of new private homes slow to below 1,000 units a month for a period, developers might have to reduce prices and this might have a knock-on effect on the HDB resale market.
Experts say developers will also have to rethink pricing for executive condominiums (ECs) if mass-market home prices fall sharply.
There has to be a comfortable price gap between ECs - a public-private housing hybrid - and mass-market private homes.
If mass-market home prices fall, EC prices will have to drop accordingly. If EC buyers think that mass-market home prices are going to decline, they may wait for EC prices to follow suit. Or if some of them think that they may be able to afford private homes when prices correct, they may opt to buy private.
ECs are usually about 20 per cent cheaper than private mass-market condos, experts note.
The new measures are the toughest on foreign buyers and corporate entities. They will now be hit with an additional buyer's stamp duty of 10 per cent. This is on top of the existing stamp duty of about 3 per cent.
Permanent residents buying their second and subsequent homes and Singaporeans buying their third and subsequent homes will have to fork out an additional buyer's stamp duty of 3 per cent.
The proportion of foreigners in the mass-market segment has been increasing over the past few years.
Foreigners accounted for 15 per cent of all suburban home purchases in the three months to September. This is up from 5 per cent in 2009 and 7 per cent last year.
Source: The Straits Times – 10 December 2011
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