ST : HDB resale deals fall 25% after new rules

Oct 2, 2010

HDB resale deals fall 25% after new rules

Fewer homes changed hands last month compared to August

By Jessica Cheam



NEW measures to cool the sizzling property market have already made an impact with sales down, prices and cash-over-valuations (COVs) moderating and buyers taking a breather.

Official estimates released yesterday point to a slowing market in both the private and Housing Board (HDB) segments with experts tipping that the pace will slow further as the year draws to a close.

HDB said yesterday that 'the impact of the measures is not fully reflected in the data yet' as most of its third-quarter transactions were submitted before the new rules were announced.

Nonetheless, it estimated that transactions of HDB resale flats fell an estimated 25 per cent last month compared with August. As a result, an estimated 8,200 homes changed hands in the three months to Sept 30, or 10 per cent fewer than the previous quarter.

The measures cooled a market that rose 4 per cent to another new record in the two months before the latest measures were announced.

The market has now seen nine straight quarters of record prices. Prices had risen 4.1 per cent in the second quarter compared to the first.

There was no official indication yesterday as to what happened to prices last month. But one agency boss reckoned they had softened about 5 per cent.

The story is more sombre in the private property market, with price rises moderating even before the measures were implemented.

Urban Redevelopment Authority (URA) estimates showed prices rose 3.1 per cent in the third quarter, down from a 5.3 per cent rise in the previous quarter.

Property agencies said their own data confirmed last month's slowdown in the HDB resale market.

ERA Asia Pacific's sales volume last month fell by almost 30 per cent over August while at PropNex, third-quarter volumes fell 35 per cent compared with the second.

Agency bosses say the new rules have hit demand in the resale market as permanent residents and private property owners have been effectively shut out of the sector by tough ownership restrictions.

HSR Property Group chief executive Patrick Liew said sales at his agency dipped 10 per cent in the past month while cash upfront asked by sellers, or COVs, have dropped 15 per cent.

'Sales have slowed because while people are waiting on the sidelines for prices to become clearer, sellers are also not desperate to sell,' he said.

ERA Asia Pacific associate director Eugene Lim said its data showed median COV for resale flats hit a high of $35,000 in August before dropping to $28,000 last month.

The median COV for the second quarter was $30,000, according to the HDB.

Mr Lim added the falling COVs implied they had softened about 5 per cent.

The new rules, which are aimed at halting a property bubble, tighten financing and restrict ownership of HDB flats.

PropNex chief executive Mohamed Ismail added: 'Many upgraders have been stumped by the higher downpayment needed for a second home now.'

Mr Lim estimates that COV could go as low as $10,000 by the end of the year while PropNex's Mr Ismail tips $22,000.

He feels that when the median COV dips below $20,000, buyers will be tempted to return to the resale market.

COV was a major factor for engineer Hildya Yong, 26, and her fiance. They bought a new five-room flat in Sengkang directly from the HDB last week.

'Even though COV is coming down, we still cannot afford it. So we decided to go with a new flat instead,' she told The Straits Times.

The full impact of the measures will be seen only in the fourth quarter, say industry analysts. HSR's Mr Liew predicts that sales and prices will stay flat before picking up next year.

But Mr Nicholas Mak, the executive director of SLP International Property Consultants, said the drop in resale flat sales will hit prices in coming months.

'The impact of the property measures will continue to be felt next year,' he said. 'They are not expected to directly cause prices to fall. However, they could be the catalyst of a decline in prices if there was any weakness in the Singapore economy in the coming year.'

Meanwhile, the HDB will launch 3,400 new flats before the year end and 5,000 in the first quarter of next year.

jcheam@sph.com.sg