Righting an ‘imbalance’

Source : Today – 26 Jul 2010

Red-hot HDB resale market will take a year to stabilise: Mah

Along with strong economic fundamentals, the red-hot HDB resale market is a result of an imbalance in demand and supply, and it will take a year or so for prices to stabilise, National Development Minister Mah Bow Tan said yesterday.

In the interim, the Housing and Development Board will roll out 18,000 to 19,000 flats this year.

“I hope with HDB pushing out a record number of flats this year, this imbalance will be redressed over the medium term,” Mr Mah said on the sidelines of HDB’s final community celebration for its 50th anniversary.

Some 9,000 build-to-order (BTO) units have been launched in the first half of the year, and another 7,000 flats will go on sale over the coming months. There will also be executive condominiums, Design, Build and Sell Scheme flats and some Sale of Balance flats, totalling about 2,000 to 3,000 units.

“If you’re a first-time buyer, there’s more than enough flats for you. But if you’re a second-timer, you have to compete in the market with the first-timers and others, and this equilibrium in the prices will be reached at a point in time in the medium term as we push out this supply,” said Mr Mah.

Property experts told MediaCorp that the European debt crisis, the possibility of a double-dip recession and a possible rise in interest rates may also impact price stability.

“The factors that suddenly come together to push up prices, if it’s not due to demographics – permanent residents and investor buying – can disappear just as quickly as (they) came,” Chesterton Suntec International research and consultancy director Colin Tan said.

Demand is also hard to predict. Mr Mah said the indication is that there will be “some slowdown” in the economy later this year.

Ngee Ann Polytechnic real estate lecturer Nicholas Mak said that “discretionary buyers” – those who can wait or have other housing options – are choosing to buy now “because they fear prices will rise”. He added: “If enough of them go into the market, it becomes a self-fulfilling prophecy.”

Agreeing, Mr Tan cautioned about a possible downside to a sharp rise in supply in just one year.

“If the demographics don’t support this, there’ll be a huge boom-and-bust cycle,” he said.

For now, Mr Mah recognised that the concern is over the Cash-Over-Valuation (COV) quantum. The latest median figure is $30,000.

But he stressed this had to be decided by the market.

“It’s in the interest of buyers to have low COVs, but it’s in the interest of sellers who own the flats to have high COVs.

“So, between these two groups, we must let them fight it out. The Government is not able to settle or fix COVs to say that it should be this or this figure,” he said.

“The Government prefers not to interfere. But we can interfere in the supply. This is something we can control.

“And I say again, we’re going to push out enough flats for first-timers. That’s the promise we’ve made, and that’s the promise we intend to keep.”