Q3 resale flat prices drop - first time in over 4 years

Singapore

AS a raft of property and credit measures continue to work their way through the property market, prices for resale Housing and Development Board (HDB) flats fell for the first time in over four years.

Data from HDB yesterday showed that the resale price index (RPI) fell 0.9 per cent in Q3, compared with a 0.5 per cent gain in the previous quarter. This is the first time the index has declined since Q1 2009.

Measures introduced between June and August, such as the total debt servicing ratio (TDSR) framework, a tighter mortgage servicing ratio (MSR), lowering the maximum loan tenure, allowing singles to purchase Build-to-Order (BTO) flats, as well as a three-year wait for all new permanent residents before they can buy a resale flat, all took their toll, analysts said. Further siphoning interest from the resale market in Q3 was a steady supply of BTO homes in the works.

"The HDB resale market is effectively serving only upgraders and limited permanent residents now, resulting in the weakening of prices and volume of transactions," said Mohamed Ismail, CEO of PropNex Realty.

The official RPI drop was also larger than the earlier flash estimate of minus 0.7 per cent. Consultants attributed this to a delayed impact from the tighter MSR introduced in August, as well as from the TDSR implemented in June.

Ku Swee Yong, CEO of Century 21 Singapore, said the TDSR "really kicked in" around August/September as some transactions might have been slowed as buyers and bankers tried to come to grips with the new rules.

The number of resale flats sold in Q3 fell 13.5 per cent to 4,529 units, from 5,235 units in Q2. All flat types, from one-room to executive, saw fewer units changing hands. The largest absolute fall came from the four-room flat segment. It saw a 13 per cent drop in transactions to 1,670 units from 1,922 in Q2.

The cash premium of cash-over-valuation (COV) also fell. ERA Realty data shows that the median COV fell by a third from the previous quarter to $18,000 in Q3. PropNex data revealed a similar trend, with COVs at a median of $17,000 in Q3.

HDB data showed notable quarterly drops in COVs in some pockets of the market in Q3, such as a $20,000 fall in median COVs for executive flats in Pasir Ris to $50,000, and a $19,000 decline in median COVs for five-room flats in Toa Payoh to $54,000.

Sellers are "generally more accommodating" at the moment, said Eugene Lim, key executive officer at ERA Realty.

"Already, more and more larger flats (five-room and executive) in non-mature estates are being transacted at valuation or below valuation," he said, adding that there was concern from three- and four-room flat owners, too, that COVs will fall further if they did not sell now.

A report by the Singapore Real Estate Exchange said about 10 per cent of resale flats sold last month transacted with no COV.

Besides the impact from the various measures, supply remains an issue that would affect prices. Ong Kah Seng, director at R'ST Research, sees resale HDB prices declining by up to one per cent this year. Mr Ismail from PropNex expects to see "less than one per cent to possibly a negative growth" for 2013, and that prices could fall further next year, at minus 3 to 5 per cent.

Meanwhile, Minister for National Development Khaw Boon Wan wrote on his Facebook page yesterday that the actual number of private and public homes that will be ready for occupation by 2016 is now expected to be 204,400 units, surpassing his ministry's earlier projection of 197,550 units.

"For this year, more than 21,000 residential units have already been built; another 9,220 units will be ready by year-end."

As for new BTO homes, HDB should hit its target of 25,000 units for the year, having launched 20,161 BTO flats to date and offering another 4,950 BTO flats next month. Another 4,455 Sale of Balance Flat (SBF) units have been offered this year, with another 3,000 to be offered next month.

Consultants generally agree that the number of resale transactions will come in below 20,000 units this year, which will be the lowest on record. They also see continued moderation of COVs, although Mr Lim from ERA said it was unlikely that the median will reach zero because of strong economic fundamentals.

On the rental front, the number of subletting transactions fell 5 per cent to 7,505 cases in Q3, from Q2's 7,891 cases. The number of flats approved for subletting edged up 0.6 per cent to 44,966 homes.