Press Release
January 23, 2009
Buyers market prevails with slower public housing growth forecast
Despite a growth of just 1.4%, after six quarters of at least 3% growth per quarter, the HDB Resale Price Index (RPI) slowed down to hit 139.4, still the highest level the HDB RPI has ever reached. The overall 13.8% growth in the RPI for public housing surpasses PropNex CEO Mohd Ismail’s earlier expectations for public housing to reach an overall price increase of at least 13% for 2008.
The diminished growth does indicate, however, the impact that the economic downturn has had even on public housing.
The indications that this is indeed a buyer’s market is evident in the fact that overall median resale prices saw only a $4,000 and $2,000 increase overall for the smaller, and now more popular, flats, as compared to double digits increases for the third quarter over the second quarter.
In addition, Mohamed Ismail points out that there was a across the board in median cash-over-valuation (COV) in the fourth quarter. Overall median COV dropped by 21% from $19,000 to $15,000, led by a 35% plunge of $6,000 t0 $11,000 for the larger 5-room flats.
Yet another sign of a cautious buying market was the fact that resale transactions in the mass market for 4Q08 plummeted by 24% from 3Q08. However this can be explained by the financial crisis in October and fewer launches resulting in fewer upgrading transactions. After all, the overall drop in the resale transaction volume from 2007 to 2008 is only 3%.
So although demand for public housing is still expected to grow in 2009, we will probably not see 2007’s and 2008’s double digit rates. Mohamed Ismail expects the RPI to grow by just 3–7% in 2009, with smaller (3- and 4-room) flats accounting for 5–8% growth and a slower 1–3% growth for larger flats.
“If the economy does not improve,” he forecasts, “there will be more downgraders and increasingly cautious home buyers in the wake of retrenchments and tighter budgeting. But we should still see growth as demand still exceeds supply.”
He adds that the 40% property tax rebates for owner-occupied residential homes will definitely be a welcome relief for existing and new homeowners. Furthermore, the increase in the Additional CPF Housing Grant from $30,000 to $40,000, in tandem with the raised income ceiling from $4,000 to $5,000, will greatly help the lower to lower-middle income households.
On that note, he feels that the Government aid for homeowners is good and should, in time, help revive the property market.
On the private property front, a price correction phase is evident, with a drop of 6.1% from 173.3 points to 162.8 (almost the same level as 3Q07), a decline which has not been seen for years.
None of the Regions (Core Central, Rest of Central and Outside Central) were spared, with the Core Central, Rest of Central and even Outside Central Regions suffering drops of 6.5%, 6.2% and 5.9% respectively.
Mohamed Ismail expects a greater slide in the RPI for the Core and Rest of Central Regions of about 10% for 2009, with fewer property investors and speculators in the higher-range market.
“The Outside Central Regions, however, should even out and not dip by more than 5%,” he adds, “as prices there have already dipped to very reasonable levels. These are due to the recent launches where developers exercised sensitivity to the poor economy.”
