While HDB resale prices are expected to remain stable in 2012, with marginal softening of the COVs (cash-over-valuation), leading to an overall price correction of between 1 and 5 per cent, sales volumes could fall slightly as buyers assess their options beyond the resale market.
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Prices of resale HDB flats seen correcting
Sales volume could fall slightly, say analysts
By MINDY TAN
23 December 2011
While HDB resale prices are expected to remain stable in 2012, with marginal softening of the COVs (cash-over-valuation), leading to an overall price correction of between 1 and 5 per cent, sales volumes could fall slightly as buyers assess their options beyond the resale market.
Mohamed Ismail, chief executive of PropNex Realty, feels that the overall price of HDB resale homes will see a 1 to 2 per cent correction.
‘Overall, we believe that HDB resale prices will remain, with marginal softening of the COVs only in the second half of 2012,’ he added.
According to Lee Sze Teck, senior manager of research and consultancy at Dennis Wee Group (DWG), HDB resale flat prices could correct by up to 5 per cent.
ERA Realty Network’s key executive officer Eugene Lim, on the other hand, countered that resale prices are likely to rise by between 5 and 6 per cent for the first half of 2012, on account that there is still a supply crunch in the resale HDB market.
‘So far, much has been said that Singapore’s economic growth may slow down or even run into a recession should the global situation deteriorate. Whilst the threat remains, things have not yet turned bad,’ he added.
Beyond the historical under-supply of HDB flats in the 2001 to 2010 decade, some of the key reasons for the supply crunch lie in policies that have been effected in recent times.
As part of the cooling measures implemented in August last year, it was mandated that resale flat buyers who are private property owners had to dispose of their private homes within six months of purchasing their HDB resale unit.
In addition, the Minimum Occupation Period (MOP) of non-subsidised flats was increased from three to five years.
This means that HDB upgraders might be reluctant to sell their HDB flats because it may be more difficult for them to buy a HDB flat in the future, said DWG’s Mr Lee. These upgraders will be looking to rent out their HDB flats, resulting in less supply of resale flats.
ERA’s Mr Lim added: ‘We are likely to see around 24,000 to 25,000 resale transactions for 2011. This is possibly the lowest ever recorded. Over the last five years, the average is around 30,000 a year.’
‘Though the DBSS programme is put on hold, we are expecting executive condominium (EC) launches to be stepped up in 2012; and this may affect the resale market demand for 2012,’ he said.
Indeed, with the 25,000 new BTO flats slated to be released in 2012, the success rate of getting a new home for first-time buyers is going to be higher, pointed out Propnex’s Mr Ismail.
‘The increase in the income ceiling for homebuyers of ECs and BTOs would encourage more to buy BTOs. As such the HDB resale sales volume is likely to drop,’ he said.
In August, the monthly household income ceiling was raised from $8,000 to $10,000 for applicants of new HDB flats; ECs had a new raised income ceiling of $12,000.
‘This would have diverted demand away from the resale market as many buyers would now be able to qualify for new flats as their income fell within the raised ceiling,’ added Credo Real Estate executive director Ong Teck Hui.
Png Poh Soon, head of research at Knight Frank Singapore, added: ‘Supply in the form of BTO and ECs are likely to be a key threat to the resale market.
‘BTO buyers with budget constraints will evaluate the options of buying new and paying at a more attractive level for their homes. Homebuyers who are considering upgrade options may consider ECs as more ECs are planned in 2012 and the recent ABSD (additional buyer’s stamp duty) does not apply to them.’
Sigrid Zialcita, managing director for research services in Asia Pacific for Cushman & Wakefield, agreed to a certain extent: ‘The larger supply of BTO flats as well as the raising of the income ceiling will go some way in reining in COV, but the effect is unlikely to be immediate . . . Mature estates have well-established amenities and older flats have a larger floor area, so the attitudes to buying a BTO flat would need some time to catch on.’
That being said, transaction volumes for resale flats might dip, in light of the new cooling measures.
While the HDB market is relatively insulated from the ABSD measures announced earlier this month - given that most buyers are first-timers or owner- occupiers rather than investors or foreigners - consultants acknowledge that buyers may take a wait-and- see approach.
‘If private market prices come down, and buyers think they can afford to go into the private market, this will have an impact on the resale market,’ said DWG’s Mr Lee.
‘If economic conditions take a turn for the worse and monthly sales figures (in the developers’ sales market) drop below 1,000 units, prices could slip up to 10 per cent in 2012 . . . this will also affect the HDB resale market and prices in the HDB resale market could ease by up to 5 per cent,’ he added.
‘Lastly, construction costs could pick up in 2012 and beyond. The large amount of BTO flats sold in 2011, shorter construction period for BTO flats and the reduction in project completion to five years for private residential sites means that there will be competition for construction resources and that could drive up costs,’ warns Mr Lee.
‘The expected slowdown in the property market and possible increase in construction costs could be a double whammy for the property market in 2012.’
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