Property analysts expect public housing market to do well in 2009

Source : Channel NewsAsia - 6 Jan 2009

Singapore’s public housing market is expected to do well this year, compared to the slumping real estate markets across Asia.

The economic slowdown means homebuyers are likely to opt for cheaper units from the Housing and Development Board (HDB) over more expensive housing like condominiums.

On the private housing front, transaction volumes and prices have fallen at an increasing pace in recent months following the financial sector’s collapse in the US.

The last time demand for HDB resale flats shot up was in 1998, a year after the Asian financial crisis hit Singapore’s economy. 49,000 resale flats were sold then, compared to 31,000 in 1997.

Numbers have since stabilized to about 30,000 sales a year on average.

ERA expects to see transaction volumes increase to 34,000 in 2009 from about 30,000 last year, given the current financial turmoil.

Eugene Lim, associate director, ERA Asia Pacific, said: “More than 80 per cent of the population base is in HDB flats. The support level is there. HDB flats is basic housing for everyone. So it’s a basic commodity, regardless of whether the market is up or down, the basic demand is still there.”

Compared to private properties, the cost of public housing is unbeatable. Even after price increases of late, HDB units still cost less than S$300 per square foot on average, compared to at least S$750 per square foot for a private apartment.

HDB prices grew about 14 per cent last year and 17 per cent in 2007.

PropNex expects price increases to be less aggressive this year at between five and eight per cent for three- and four-room flats. That is still far better than private properties, which are seeing falling prices.

However, the real estate agency warns that prices for five-room and executive flats may be at risk of echoing trends in private homes.

Mohamed Ismail, CEO, PropNex Realty, said: “Some of the bigger flats are in the market, floating for more than two months with no takers, even at zero cash (above valuation).

“And if this trend continues…, what is likely to happen in the third quarter, midway through this year, will be bigger flats will start to fall or even go below value.”

Analysts noted that location-wise, buyers tend to avoid pricey areas like Queenstown and Bukit Merah in such tough times, in favour of places like Jurong and Woodlands.