HDB resale prices hit record high again rising by 4.1% in Q2

Source : Channel NewsAsia – 23 Jul 2010

HDB resale flat prices have hit record highs again. Prices rose by 4.1 per cent in the second quarter of 2010 compared with the previous quarter. This makes it the fifth straight quarter of increase.

The HDB resale market continues to attract keen interest. Analysts said the demand is driven by those who don’t qualify for a new flat or want a flat quickly.

These are the singles, permanent residents, flat owners who want to upgrade or downgrade and married couples who can’t wait three years for a new HDB flat.

Chris Koh, director, Dennis Wee Group, said: “Private property prices are very high today and because it’s so high there are a lot of people who are now turning to the HDB market.”

The high demand also sent the cash-over-valuation or COV upwards.

96 per cent of transactions in Q2 were above valuation.

Mr Koh added: “A lot of people who are selling their HDB flats today are cashing out, with S$100,000 to S$200,000. So for example, if you ask them to put down a COV of S$50,000, for the next flat they buy, they wouldn’t mind.”

Cash-over-valuation (COV) is the cash premium paid on top of a flat’s valuation.

According to the latest data from HDB, the median COV is now some S$30,000 for all resale transactions. But market watchers said the market could be reaching a threshold soon.

That’s because of a ruling introduced in March 2010 requiring home buyers who want a second HDB loan to plough back half their cash profits from the sale of the first flat.

Mohd Ismail, CEO, PropNex, said: “Even if anyone who makes a S$100,000 profit, you have to plough back S$50,000 into the new flat and you’re only left with S$50,000. And with that S$50,000, if you pay a high COV of S$40,000, you are left with nothing.”

Mr Ismail added that the market is showing signs of resistence and expects the COV to hit a threshold of S$40,000.

Market watchers noted that many buyers and sellers now treat the COV as part and parcel of any resale transaction.

And this is not healthy for the market in the long term.

Mr Ismail added: “During the previous peak in 1996, there were people who paid well above S$100,000 COV for a house. We had a house at Yishun, valued at S$510,000, and somebody paid S$135,000 cash. Today, even though the HDB prices are at their peak, in terms of price index, such houses are still below water.”

Given the positive economic outlook, analysts expect prices to continue climbing.

The Housing and Development Board (HDB) said it’ll ensure that there’s an adequate supply of new flats for first-time buyers.

In the first six months of 2010, HDB launched close to 9,000 Build-To-Order (BTO) flats, which is the number of BTO flats launched for the whole of last year.

Another 7,200 BTO flats will be launched in the second half of 2010, bringing the total BTO flat supply for 2010 to 16,000.

This is an increase of 80 per cent over the previous year.

HDB said the BTO projects in the second half of the year will enjoy a good geographical spread in towns such as Woodlands, Yishun, Punggol and Sengkang.

For this month, flat buyers can look forward to about 1,000 BTO flats in Jurong West and Bukit Panjang.