The cumulative impact of the increased supply of new BTO flats and the recent increased income ceiling for HDB home buyers implemented in August 2011, are clear from the 4Q11 flash estimates released by HDB today. The impact is evident in a marginal price increase of 1.7% in the HDB (RPI) for 4Q11flash estimates from the previous quarter.
“We are seeing the COVs and resale prices being moderated in the last few months. COVs are likely to remain with marginal softening around the range of $10,000 - $15,000 dip into the coming 6 to 9 months. This works out to approximately 20 – 35% dip in COV. That said, however, the overall price of HDB resale homes will only have a 1 – 3% dip.”
According to PropNex data, the median Cash-Over-Valuation (COV) levels are now ranging from $25,000 to $52,500 for the last 3 months.
Median Cash Over Valuation
3-rm 4-rm 5-rm Executive
Oct 2011 30,000 33,000 37,000 52,500
Nov 2011 28,000 33,000 35,000 51,000
*Dec 2011 25,000 31,000 30,000 46,500
Source: Streetsine and PropNex, * till 20 Dec 2011
“The availability of new BTO flats saw an ease on the current demand as home buyers are eventually able to have their first home sooner than expected and the available option of Executive Condominiums for the ‘sandwich’ home buyers with the increase income ceiling, had resulted in the HDB resale market to slow down. However, the release of these new flats had not eradicated the strong demand for resale flats consisting of buyers in the categories of singles, permanent residents, HDB upgraders and downgraders as well as private property downgraders. These buyers are genuinely in search of homes for their own occupation. Thus, HDB RPI saw a marginal increase in the last quarter of 2011,” explained PropNex Realty’s CEO Mr Mohamed Ismail.
This more gradual growth for the RPI looks set to continue in the next quarter but eventually the HDB resale market should stabilize in the mid-term.
As 2011 drew to a close, Singapore's residential property market has surprised market-watchers with its resilience despite a tough set of market-cooling measures being imposed in January 2011 and an uncertain outlook arising from the financial market turmoil. The main factors affecting HDB resale prices in 2012 are:
1. The supply of BTO flats. The increased supply of public housing and the recently raised income ceiling had many home buyers switching to buy the HDB BTOs or ECs. As such, the demand had switched from the HDB resale market to the BTOs, thus, prices may be affected.
2. Existing property regulations. As part of the cooling measures implemented in August 2010, the minimum occupation period is 5 years and the 60% loan to value (in January 2011) had discouraged HDB owners to sell and switch homes.
3. The demand for resale homes. The real demand for HDB resale flats will remain strong as the home buyers comprise of singles, Permanent Residents, HDB downgraders and upgraders as well as private property downgraders. With the strong demand, prices are unlikely to have drastic changes.
“From the overall analysis of the demand and supply of HDB resale homes, in the short-term, it is unlikely that prices will change drastically. We are expecting another 25,000 flats to be released in 2012 and this will reduce the demand for resale flats. Price stabilisation will set in and possibly even a price correction of not more than 3% in the HDB resale market,” remarked Mohamed Ismail, CEO of PropNex Realty.
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