Demand for HDB set to rise for 2H09

NewsJuly 24, 2009

After a slight stumbling dip of 0.8% the previous quarter, HDB’s resale price index (RPI) for 2Q09 has climbed up by 1.4% to an all-time high of 140.2.

Despite the still-increasing demand for private properties, PropNex CEO Mohamed Ismail is not surprised to see growth for the HDB RPI. He supports this statement with the fact that PropNex alone has seen a Q-on-Q increase of 48% for HDB resale flat transactions for 2Q09.

Another interesting point noted by Mr Ismail was that the number of resale applications for 5-room and executive flats increased by 80% and over 100% respectively Q-on-Q. He compares this with the last three quarters before that when the two flat types saw a steady decline due to the poorer economy. These numbers are a clear sign that people’s market confidence is growing.

“One reason for this, as feedback from the ground indicates, is that demand in matured estates far exceeds supply,” Mr Ismail explains.

“And this is because the cash-over-valuation (COV) for HDB flats is still low at the moment,, with overall COV at $3,000, the lowest for the last two years” he explains. “In fact, the overall COV for larger flats is practically non-existent, and this has sustained the demand for HDB resale flats. Many first-time and buyers are now encouraged to take advantage of the various government grants to obtain a flat in the short-term.”

Normally, when the COV is higher, they would look instead to BTO and DBSS projects. However, buyers have to wait three to four years before they can move in. The increased number of PRs in Singapore are also taking advantage of the low COV to buy flats.

As the demand is strengthening quickly, sellers are expected to demand a higher COV. As such, Mohamed Ismail expects the RPI to rise by 4–5 points over the next twio quarters to reach about 145 by the year’s end.

He also forecasts the total number of resale flat transactions to exceed 32,000, surpassing the last three years which all fell below 30,000, as the mid-year mark has already hit 16,630.

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