PRs help drive flat resale prices

Source : Today - 2 Jul 2008

HDB upgraders’ demand for condos outside central region could also rise

AS SOARING rental rates add to their cost burden, more Permanent Residents (PRs) are snapping up Housing and Development Board (HDB) resale flats.

“Two years ago, you would pay less than $1,000 a month in rent for a four-room flat but now, you would be paying almost $2,000,” said PropNex chief executive Mohamed Ismail.

“If you are going to be here in the long run, it doesn’t make sense to rent when you can use the same money to buy a flat. One of my colleagues sells just three-room flats, and seven out of 10 units she sells are to PRs.”

The strong immigrant market is just one factor behind the strong 4.4 per cent growth in HDB resale prices between April and last month, even as the private property market is cooling. PRs cannot buy flats direct from the HDB unless they are married to a Singapore citizen.

ERA Singapore, which corners 40 per cent of the HDB resale market, has seen a four-fold increase in their PR clientele - from just 5 per cent in 2004, to some 20 per cent now.

Also fuelling the “pent-up demand” :- as Chesterton International’s consultancy and research head Colin Tan put it :- are HDB upgraders who cannot afford private housing and downgraders from the private housing segment.

With private homes still priced out of reach of the mass market for now, analysts believe the HDB resale market will remain bustling for some time.

This upbeat outlook echoed what National Development Minister Mah Bow Tan had said last month of this sector: “It’s a real demand, a real market for people to buy a flat to live in, unlike the private market where some people buy to live, some to invest, some for speculation.”

“So long as there are new families being formed and new immigrants coming in, the HDB market will remain a very active one.”

Private homes within reach of HDB upgraders?

While this is good news for the flat values of home-owners, young couples and new families have been concerned about a limited supply of new HDB flats to choose from, and about affording the Cash-Over-Valuation of resale flats.

With the housing board announcing a steady stream of upcoming projects this year, these first-timers’ needs areaddressed.

But those who cannot wait to have a roof over their heads :- given that new flats will go up on a built-to-order basis, and the reduction of balloting exercises for excess flats to just two a year :- and those who cannot buy direct from the HDB continue to fuel resale demand.

Looking ahead, with HDB resale prices continuing strong as private home prices taper off, would more HDB upgraders be able to move to private property?

Recent launches of condominiums outside the central region such as Dakota Residences have gone for less than $1,000 per sq ft on average. Clover By The Park at Bishan is going at an average price of $750 psf.

Compared to the average $550 psf for executive condominiums now, the price may just be right for some to go private.

“We could see anything from $600 to $1,000 psf in upcoming launches for condominiums outside the central region,” said Cushman and Wakefield Singapore managing director Donald Han. “Developers will be targeting the HDB upgraders.”