Thursday, January 3, 2013

HDB resale flat prices climb to historical high in 2012


HDB resale flat prices climb to historical high in 2012
Business Times
JANUARY 03, 2013

[SINGAPORE] Resale flat prices grew at their strongest pace in five quarters to reach a historical high, as the Government plans even more Built-to-Order (BTO) flats this year.

The latest flash estimate of the Resale Price Index (RPI) from the Housing and Development Board (HDB) yesterday showed that prices rose 2.5 per cent to 202.9 in the fourth quarter of 2012 from the previous quarter.

This was the fastest rate since a 3.8 per cent increase in Q3 of 2011.

For 2012 on a whole, prices for resale homes were 6.6 per cent higher than the year before. This was down from 10.7 per cent in 2011 and 14.1 per cent in 2010.

Also on Wednesday, the HDB said it will increase its offering of BTO flats this year to at least 23,000, up from at least 20,000 announced earlier.

The first batch of 3,346 homes will be put up for sale this month and will be in Choa Chu Kang, Yishun, Hougang, Tampines, Kallang Whampoa and Ang Mo Kio.

Lee Sze Teck, senior manager for training, research and consultancy at DWG, believes the revision in supply by HDB could foreshadow policy changes.

Analysts said both demand and supply factors continued to be at work in the resale market last year.

Eugene Lim, key executive officer at ERA Realty, noted that resale prices rose despite a record 34,237 new flats being offered last year, comprising 27,084 BTO units and 7,153 flats under the Sales of Balance Flats exercise.

"This is because the HDB's new flat programme is heavily skewed in favour of first-time home buyers," he said.

This means first-timers with immediate housing needs, singles, permanent residents and second-timers continued to drive demand for resale flats. Under current rules, between 85 and 95 per cent of BTO flats are set aside for first-timers.

DWG's Mr Lee highlighted a "gradual depletion" of available resale flats after several measures introduced in the last few years.

He cited the extension of the Minimum Occupancy Period, the increase in allocation of BTO flats and Executive Condominiums to second-timers and the requirement for private home owners to sell their private residences if they want to stay in their HDB flats.

Another reason, said Nicholas Mak, executive director of research and consultancy at SLP International, was buyers bringing forward purchases for fear of higher prices in the future.
He also pointed to a "stubbornly high" cash- over-valuation (COV). This cash premium stood at a median of $34,000 in Q4 of 2012, figures from the Singapore Real Estate Exchange showed, $2,000 shy of the record set in 2011.

To address this, ERA's Mr Lim suggested that transaction procedures for resale flats fall in line with private practices.

Currently, the practice for resale flats is for buyers to first get a valuation for the unit and then negotiate the COV to get the final price.

Mr Lim feels this puts the focus on the COV and not the market value of the flat, and thinks transactions should look at just one single price which incorporates the COV.

"The practice of negotiating prices for HDB flats should not differ from that of private properties," he said, noting that "COVs" from private sales are not made public.

That said, market watchers acknowledged the moderation in resale prices last year and predicted prices to go up between 4 and 8 per cent for 2013.

Mohamed Ismail, CEO of PropNex Realty, expects resale price growth to stay strong in the first half of 2013 as construction takes time, even as the HDB is ramping up supply.

"The impact of this increased supply will only be felt in the second half of this year," he said.
Still, it will take a rude shock before prices drop.

Said ERA's Mr Lim: "In the absence of a recession, property prices are unlikely to dip."


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