The HDB market is well on track for a steadier and more gradual growth in 2011, with 4Q10’s Resale Price Index’s (RPI) marginal increase of 2.5% up to 172.0 reflecting the impact of 30 August 2010’s cooling measures. However, with the further reduction of the Loan-To-Value (LTV) cap to 60% for additional mortgages, the HDB resale market is expected to slow down for the rest of 2011.
“Despite the fact that the RPI has reached a new record high, we can see from HDB’s 4Q10 data that the 30 August cooling measures have certainly impacted the market,” says PropNex CEO Mr Mohamed Ismail. “The sales volume dropped 21.3% Q-on-Q to 6,454 resale units sold in 4Q10, bringing the total number of units sold in 2010 to 32,257, 13.3% lower than 2009’s sales volume.
“To complement this drop in sales volume, overall median Cash-Over-Valuation (COV) has also plunged from 3Q10’s $30,000 to 4Q10’s $23,000. This is slated to drop even further, as our (PropNex’s) January data indicate an overall median COV of $22,000, which is just over 4% lower than HDB’s 4Q10 median COV. In fact, our latest figures show that the median COV for 3-room flats now stands at about $16,500. This is good news for potential homebuyers of smaller HDB resale flats, especially the lower-income families and younger couples.”
However, Mr Ismail notes that median resale prices are still inching upwards, with 4Q10’s median resale prices showing increases of 1.6–3.4%. HDB’s 4Q10 results show median resale prices of $300,000, $385,000, $460,000 and $548,000 for 3-room, 4-room, 5-room and Executive flats respectively; PropNex data for January indicates median resale prices of $298,000, $393,000, $466,000 and $538,000 respectively, a 1.8% drop to 2.1% increase, reflecting a possible plateau being reached in the RPI.
He reveals that valuations for resale flats are based on prevailing caveats for flats in the vicinity, hence there is a lag time of about six to eight weeks before we see any price corrections aligning to the actual market sentiment.
“It must also be highlighted,” cautions Mr Ismail, “that some of our data reflects transactions that took place before the additional cooling measures announced on 13 January 2011. Feedback from the ground has indicated that there is less movement amongst the current HDB dwellers due to the 60% LTV cap. Therefore, it is possible to see a further dip, though not drastic one, for median COVs and sales volume in 1Q11.”
Mr Ismail once again refers to PropNex sales data for January 2011, which alludes to an estimated 20% drop in the volume of resale transactions expected for 1Q11.
“The first quarter is always slow,” he says, “as there are the New Year and Lunar New Year holidays to consider, as well as the fact that February is a short month.”
With the additional cooling measures announced on 13 January 2011—and considering the fact that the Government will be increasing the supply of new flats this year—Mr Ismail expects the median COV to dip to about $20,000 for 1Q11 and hover around the $18,000 to $20,000 mark for the rest of 2011, barring any unforeseen economic downturn and additional cooling measures.
In terms of the HDB RPI, Mr Ismail forecasts a 1–2% growth for 1Q11, as the market comes to grips with the additional cooling measures, before seeing a slow and sustainable growth in 2011 of about 5–8% overall.
For enquiries, please contact:
Mohamed Ismail (CEO) 9487 1414
Adam Tan (Corporate Communications Manager) 9006 8726