ST : HDB resale prices soften as sales slow down

Sep 18, 2010

HDB resale prices soften as sales slow down

By Jessica Cheam

PRICES in the red-hot Housing Board (HDB) resale flat market are beginning to soften, with the number of sales also dipping as home buyers and sellers respond to recent government moves to cool the market.

Property agencies interviewed by The Straits Times said median cash upfront paid by buyers, known as cash-over-valuation (COV), is expected to drop from $30,000 in the second quarter to about $20,000 by year-end.

At ERA Asia Pacific, PropNex and HSR Property Group, sales transactions were reported to have dropped 15 per cent to 30 per cent in the two weeks or so since the measures were announced on Aug 30.

Together, the three agencies account for the lion's share of the HDB market.

Until the recent pause, HDB resale flat prices were rising strongly. They shot up 4.1 per cent in the second quarter, smashing records for the eighth straight quarter, and prompting concerns that prices were beyond the reach of Singaporeans.

The Government responded by tightening lending rules and added restrictions to home ownership to dampen demand.

The new rules have changed the dynamics of the market virtually overnight, say analysts, transforming it from a seller's market to a buyer's market.

The days of high COVs, where cash-rich buyers paid $75,000 to $100,000 cash upfront for flats in popular estates, are long gone, said Dennis Wee Group director Chris Koh.

'Sellers are more realistic now. They have lowered their asking prices,' he said. However, he noted that prices are still holding firm for flats in established towns such as Toa Payoh and Bishan.

At suburban estates such as Punggol and Sengkang, asking COVs seem to be weakening, although if these flats are near amenities like MRT stations, sellers are holding to their asking prices, he said.

PropNex communications manager Adam Tan said its data showed COV values rose in July from second quarter levels, though this was prior to the government measures.

For three-room flats, median COV rose to $35,000 in July from $26,000 in the second quarter. For four-room flats, it rose to $40,000 from $30,000, and for five-room units, to $45,000 from $33,000.

However, COV has softened by up to 5 per cent to 10 per cent in recent weeks. Recent price levels are still being collated, said Mr Tan.

As an example of how the market has shifted in the buyers' favour, he said PropNex recently brokered a sale of a Punggol executive flat at $20,000 COV - $30,000 below the median COV for that flat type and location in the second quarter according to HDB data.

'We can see buyers adopting a wait-and-see attitude now, so those desperate to sell have had to adjust their expectations,' said Mr Tan.

ERA Asia Pacific associate director Eugene Lim said sales are slower 'because of the current stand-off between sellers and buyers. But this low volume is temporary as the market is trying to find its footing,' he said.

The tighter financing rules, which do not allow buyers to qualify for an 80 per cent loan unless they sell an existing home, are also affecting sales, said Mr Koh.

'Sellers are asking for an extension of stay, making sales harder to close,' he said.

IT executive Cai Yong Jie, 30, a first-time buyer who welcomed the recent moves, has been negotiating with sellers to bring down the COV amount.

'Many sellers are a bit more realistic now and will consider my lower offer,' he said. But he has also applied for a new flat under the HDB's build-to-order (BTO) scheme as such flats are still cheaper.

The measures seemed to have somewhat dampened demand for new flats, as HDB's latest sales launch at Yishun closed with slightly less than three applicants for every flat - well below the typical six bids each seen in past years.

Still, analysts say it might be too early to see the full effects of the measures.

HSR chief executive Patrick Liew predicted that the market 'will be flat for three months, and then we will see activity again because we have genuine buyers and sellers out there in the market'.

In terms of demand and supply, there is still an undersupply of HDB resale flats in many areas, he said.