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Latest Property Real Estate News - Published on 28/10/2011
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 3Q11 results released by HDB today.
The impact is evident in a 10% drop in the HDB resale transaction volume to 5,903 cases while the HDB Resale Price Index (RPI) however, still sees an increase of 3.8% for 3Q11 Q-on-Q, marginally up from a 3.1% growth the previous quarter. The median Cash-Over-Valuation (COV) levels are now ranging from $30,000 to $66,500.
“The immediate availability of 8,200 units in September saw an ease on the current demand as home buyers are eventually able to have their first home sooner than expected, thus the resale market showed a 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. However, due to the cooling measures in January this year, with the revised Minimum Occupation Period to 5 years and the lower 60% Loan-To-Value ratio, home owners are reluctant to move or sell their flat, resulting in a supply crunch and driving median resale prices up,” explained PropNex Realty’s CEO Mr Mohamed Ismail.
For the past 5 years, from 3Q06, HDB Resale flat prices saw a whopping increase of 82.35%. In spite of this, we are expecting prices to stabilize with the introduction of 28,000 new BTO and SBF units released in 2011 and another 25,000 units in 2012, having a cooling effect on the resale market as more young couples turn from resale flats with high COVs to a wider choice of new flats with a lower price tag.
Gradual Growth Coupled With Rising COVs
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. Although COV levels are likely to rise in 4Q11, the levels will probably plateau by mid 2012. The overall median COV has increased by 10% compared to 2Q11 with the highest increase evident in the Executive flat category up to 20% increase Q-on-Q.
It was cautioned that if would-be HDB upgraders continue to be priced out of the mass market private properties, and the supply of resale flats does not rise fast enough or remains limited due to the Minimum Occupation Period for both first-timers and non-first-time buyers, then the increased demand for HDB resale flats may push the COV levels up even further.
Regardless, Mr Ismail forecasts the HDB RPI to stabilize in the last quarter this year and the overall increase in price for 2011 will be in the range of 11 to 12% compared to 13.4% in 2010.
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