AFTER a quiet start to the year, prices of both private and public homes rebounded slightly last quarter, even as the battle to keep a lid on prices rages on.
Housing Board (HDB) resale prices inched up 1.3 per cent in the second quarter to a new record high - rising more quickly than the 0.6 per cent gain in the three months before, according to preliminary data released yesterday.
The 0.6 per cent first-quarter rise had been the smallest since the first quarter of 2009 and had sparked talk that prices had hit a ceiling and might even correct down the road.
The dip in private home prices in the first quarter was also shortlived with prices inching up marginally by 0.4 per cent, reversing a 0.1 per cent fall in the first three months this year.
Experts say the slowdown in the HDB resale market at the start of the year that led to lower cash premiums paid for resale flats - also known as cash over valuations (COVs) - has enticed buyers back into the resale market.
Some private property owners may have decided to cash out of their suburban condos to buy HDB flats instead, leading to an uptick in resale deals, they add.
DWG's senior manager of research and consultancy Lee Sze Teck noted that median COVs for five-room flats, for example, were 27 per cent lower in the first quarter from the quarter before, according to his agency's sales.
Buyers may also have turned to resale flats after failing to get a unit at the more than 8,000 HDB flats launched in March this year, leading to both resale activity and prices heading back up, he said.
Some owners of older mass market condos might have also decided to take profit and move to HDB estates to be closer to their children, ERA Realty key executive officer Eugene Lim noted. They are mostly older retirees.
The proportion of HDB resale purchases by those with private home addresses has risen to about 30 per cent from 25 per cent for all of last year, according to ERA's transactions, Mr Lim said. This suggests more private home owners have taken the opportunity to cash out of the bull run of mass market home prices, which spiked 55 per cent in the past three years.
Still, despite this uptick in market activity, HDB resale prices are expected to flatline or even dip towards the end of this year.
PropNex chief executive Mohamed Ismail said prices have peaked and are unlikely to see substantial rises as buyers are becoming reluctant to pay high COVs.
'The (index) has consolidated its high prices and growth will be less than 2 per cent in the next quarter. I would not be surprised to see a negative growth in prices towards the end of 2012.'
DWG's Mr Lee expects resale HDB prices to increase by about 5 per cent for the rest of the year.
Overall median COVs, however, are also expected to hold steady. COVs hovered at about $26,000 in the first two quarters, well down from $35,000 in the fourth quarter of last year.
One reason, said Mr Lim, is rising HDB flat valuations, which are catching up with selling prices. 'Valuations are based on previously transacted prices, and since the selling price of resale flats is not growing exponentially, cash premiums seem to be holding steady.'
He cited a three-room flat in Potong Pasir valued at $360,000 in May and sold with a $60,000 COV at $420,000. A month later, in June, a similar flat was valued at $380,000, a difference of $20,000.
On the private front, experts also remarked on the resilience of the market, which has stood its ground despite a slew of cooling measures since September 2009.
The 0.4 per cent increase has yet again sent overall prices of private homes to a record high on the back of low interest rates and plenty of available loan funds.
Investor appetite for real estate also remains strong partly owing to turmoil in stock, foreign exchange and commodities markets, said International Property Advisor chief executive Ku Swee Yong.
City centre home prices inched up 0.6 per cent, reversing a dip of 0.6 per cent in the previous quarter while city fringe home prices were flat. Home prices in suburban areas rose 0.4 per cent, down from a 1.1 per cent gain.
However, Colliers International research and advisory director Chia Siew Chuin sounded a note of caution. Rising price resistance and the onslaught of a fresh land supply may ease demand for private homes in the next six months with prices expected to be relatively stable with marginal upside for the rest of the year, she said.
Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)
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