Saturday, September 1, 2012

COVs for resale flats rising again

Straits Times: Sat, Sep 01

CASH premiums for HDB resale flats are slowly inching upwards again after falling and stabilising for most of this year.

Fresh data from the larger property firms revealed that the overall median COVs, or amount paid above the valuation of a flat, was about $30,000 for the previous two months.

Analysts say the rebound is due in part to a stronger buyer sentiment, coming on the back of flagging premiums.

The overall median was about $26,000 in the first two quarters this year, down from about $34,000 in the fourth quarter last year, according to agency estimates.

PropNex chief executive Mohamed Ismail said: "Home buyers these days are very well informed and responsive to market trends. COVs dipped with the ramp up of Build-To-Order (BTO) flats earlier this year, and now there is increased interest and demand in the resale market."

The recent resale transactions also produced some jaw-dropping numbers. For instance, a five-room flat along Holland Drive that was sold last month commanded a premium of $135,000, while an executive apartment in Woodlands traded in July with a $130,000 cash incentive.

ERA Realty key executive officer Eugene Lim said, however, that these are exceptions to the rule. "These buyers could be private property downgraders who are cash rich, and may have even funded the purchase without a loan."

"Traditionally, the areas with higher cash premiums tend to be mature towns where new flats are a scarcity," he added.

Such areas include Bishan, Marine Parade, Queenstown and Toa Payoh.

Overall, analysts expect cash premiums to stay at this level for the rest of the year, although resale flat prices will continue to inch upwards.

Said Mr Ismail: "There is a resistance among buyers to pay any higher premiums in general, as there are many more options in the market, such as new flats if they are willing to wait, or even executive condominiums."

To stabilise and meet the demands of the red-hot housing market, the Government had promised about 25,000 new flats this year, and at least 20,000 next year.

Compared to resale flats, these units could mean a wait of more than three years for home buyers, depending on construction time.

According to Dennis Wee Group senior manager Lee Sze Teck, the number of resale transactions could also slow down.

"The flat launches in popular estates this month could lead to buyers waiting on the sidelines instead to try their luck," he said.

The Housing Board plans to put about 6,700 flats on offer this month. These will range from new flats in Ang Mo Kio, Kallang/ Whampoa and Tampines, as well as balance flats that were unsold in previous sales exercises.

House hunter Marcus Lai, 27, is hoping fervently that cash premiums as well as resale prices will fall.

"Property prices have been crazy in the last few years for the areas that I'm scouting. I can only hope that they will come down soon so I can finally get a home of my own."

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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