Despite HDB resale flats hitting record prices last year, the total number of HDB resale transactions at 25,094, had increased 2% y-on-y in 2012. Singapore’s HDB resale price index (RPI) continued to defy the odds by rising 2.5% to reach 202.9 in 4Q12—crossing the 200 point price index mark. To put into perspective, HDB resale prices have powered up by 46.7% from the advent of the post global financial crisis in 2009, albeit being the lowest rate of increase since 2007.
Chief Executive Officer of PropNex Realty, Mr Mohamed Ismail, said “The overall 2012 HDB RPI increase of 6.6% is above market expectations mainly due to the strong finish in the last quarter. The possible reason for the price resilience is the continued strong demand for public housing, which is compounded by the fact that BTO flats usually take up to three years to be ready for move-in. Also, the demand for resale flats comes from those who are still ineligible to purchase BTO flats directly from HDB, such as permanent residents (PRs), singles, and second-time buyers such as private property down graders and existing HDB lateral down graders or upgraders who require housing immediately.”
“We have also witnessed a tight supply in the HDB resale flat market as many potential sellers decide to stay put in their current HDB property as prices have peaked in the HDB resale market as well as the private property secondary market (he cites the 1.8% rise in the URA Private Property Price Index in 4Q12). Regardless of whether there are BTO flats, if private property prices are too high, many will still be unable to afford private property, so they will turn to a resale market to buy a flat instead. Therefore, the demand will continue to remain strong from those not eligible to buy BTO flats”, explained Mr Mohamed Ismail.
“We expect the overall 2013 HDB price increments to be between 3 to 5% especially after the latest cooling measures. Permanent residents (PRs) will now have to raise an additional 5% cash outlay to pay for the ABSD in their purchase of the first resale flat. In addition, with the restrictions on the Mortgage Servicing Ratios (MSRs) for Loans for PRs, they can now borrow up to 30% of the borrower’s gross monthly income (originally 40% of the borrower’s gross monthly income). PRs are also now be disallowed from subletting and must sell within 6 months of purchase a private residential property. These measures will see some ease of demand for the HDB resale flats and thus on the price increments. Overall, median resale prices of HDB this year will substantially slow down from the hay days of double digit growth in 2010 and 2011 and 6% growth in 2012. This year, we expect HDB prices to remain flat and at best attaining only a 3 to 5% price growth.
The government continues to remain watchful towards the residential sector—or at least until bottlenecks in the housing supply eases. With various supply and demand side actions taken to dampen euphoria in the resale sector, property price momentum is seeing a slow down.
COVs to remain stable
Based on PropNex data, COVs rose by about 10% in 4Q12 as homeowners prefer to rent out their HDB flats then to sell them. HDB flats are viewed as a valuable asset by most Singaporeans and they do not have an incentive to sell and upgrade as private residential market prices are at its all-time high too. The lower supply that had led to a lower transaction volume, had caused the overall resale prices to rise.
Median COV 3-rm 4-rm 5-rm Executive Overall
1Q 2012 $22,000 $26,000 $28,000 $40,000 $25,000
2Q 2012 $20,500 $25,000 $28,000 $40,000 $25,000
3Q 2012 $25,000 $30,000 $33,000 $40,000 $30,000
4Q 2012 $28,000 $35,000 $38,000 $50,000 $33,000
Source: Streetsine and PropNex
Data generated as of 25 Jan 2013
“Overall the new cooling measures will result in lowering the COVs as buyers will have to contend with lower MSR for all Singapore citizens and Singapore PRs and the new 7% ABSD for PRs. The COVs for bigger flats will have a downward pressure of 10 to 20% lower due to the lower MSR. This lower COV may encourage some first-timers to enter the resale market.”
“In the aftermath of the January 2013 cooling measures, the upward trend of the HDB resale prices will ease as buyers take some time to acclimatise themselves to the new measures—which will result in a gentler price appreciation. In the longer-term however, it is unlikely that prices will change drastically as the government continues to flush the market with ample supply of flats (the HDB will supply 23,000 BTO flats in 2013) this year to rein in resale prices and to meet strong first-timer demand. As such, we expect the upward pressure on HDB resale prices to abate slightly with the onset of higher supply,” explained Mr Ismail.
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