HDB resale prices ease less in mature areas

Singapore

SRX Property's April flash estimate showed that overall resale prices of Housing & Development Board flats have eased 6 per cent year on year, with prices in mature estates faring relatively better, with a 4 per cent drop.

Prices in non-mature estates have eased more, to the tune of 7.4 per cent, over the same period.

On a month-on-month basis, SRX Property's overall price index for HDB resale flats rose 0.2 per cent in April - contrasting with a 0.8 per cent month-on-month drop for March.

The other big takeaway from the data released on Thursday is that the volume of HDB resale flat transactions rose 19.3 per cent from 1,349 units in March 2015 to 1,610 units in April - the highest in two years.

Year on year, too, the resale volume for April 2015 was up 8.5 per cent from 1,484 units in April 2014. However, the April 2015 volume is 55.9 per cent below the peak of 3,649 units in May 2010.

ERA Realty key executive officer Eugene Lim noted that the momentum is continuing to build in April following the increase in volume in March. "The March to July window is critical in determining the pace of resale transactions before the Hungry Ghost Month sets in in August," he added. If the pace sustains, he is confident of 18,000 to 20,000 resale transactions this year, which would mark a rebound from a low of around 17,300 units last year. "The pick-up in resale volume can be attributed to stabilising resale prices as well as the slowdown in Build to Order (BTO) launches by HDB," he added.

R'ST Research director Ong Kah Seng said that the marginal 0.2 per cent m-on-m rise in HDB resale prices in April is not reflective of a bottoming-out in prices. The small price gain despite a substantial surge in volume last month suggests buyers are mostly "very opportunistic" and "generally reluctant to accede to sellers' asking prices due to the MSR (mortgage service ratio) cap".

Savvy resale flat buyers are aware of the ongoing ramp-up in completions of private homes and executive condos or ECs, a public-private housing hybrid. "HDB flat owners who bought private homes can still keep their flat for renting out after their private homes are completed; but owners of HDB flats in far-flung locations where leasing demand is weak may increasingly put them up for sale.

"Also, when a potential HDB flat buyer senses that a flat owner needs to sell his unit within a limited time after his new BTO flat or EC is completed, the buyer will actively negotiate for a lower price," Mr Ong reasoned.

ERA's Mr Lim said that due to buyers' conservative stance, there will likely be a moderate price decline in the coming months before prices stabilise by year end. "Overall, the price fall this year may be less than 5 per cent across the board."

Mr Ong commented that resale prices in mature estates have held better not only because of their location which appeals to buyers but also due to continued strong leasing demand for such units. This has resulted in tight supply of such flats available in the resale market. "HDB upgraders generally see little need to sell away their flats in mature estates when the private condos they bought from developers are completed. Instead, they prefer to lease out their HDB flat after they have moved into their new condo."

Another reason for the tight supply of flats put up for resale in mature estates is that there was a relatively small supply of private condos (and no ECs) launched in these locations during 2010-2013. In contrast, non-mature estates saw a slew of private condo and EC launches during this period, which would be completed from 2014 onwards. "Most buyers of ECs and condo projects in non-mature estates also tend to be HDB upgraders who have been staying in or around the same locality; so more flats are put up for resale upon the EC or condo project's completion," added Mr Ong.

SRX Property's overall median transaction over X-value (TOX) for HDB resale flat prices for April 2015 was negative S$2,000, an improvement from the negative S$3,000 in March. The median TOX measures how much people are overpaying or underpaying against the computer-generated estimated value or the so-called X-value.

Among towns with more than 10 resale transactions, Jurong East posted the highest median TOX of positive S$7,000 in April. "With the excitement building as Jurong East continues to transform into a regional centre, property prices are likely to differ from the current overall downtrend as demand remains strong for properties located within the mini-CBD," said ERA's Mr Lim.