PRICES of resale HDB flats in Punggol have fallen in recent weeks to the point where they are now around the same level as new ones launched barely two months ago.
Normally new flats are markedly cheaper than resale ones as the Housing Board ‘deeply discounts’ their price to prevailing market values as a form of subsidy to first-time home buyers.
But the worsening recession, fragile job market and weak property sector have closed this ‘discount gap’ to virtually nothing in some cases, making resale homes as attractive as new ones.
This is a reversal of the trend during the pre-crisis property boom which saw first-timers flock to HDB for new flats when they found themselves priced out of the resale market.
Experts also point to weaker demand for premium, five-room flat types, which has led to a drop in prices.
The HDB’s website this week showed that the range of resale prices for such five-roomers in Punggol had dipped, from $375,000 to $462,000 in December to about $350,000 to $440,000 last month.
Out of 36 five-room transactions in February, a majority of 29 were priced below $400,000.
This puts them in a similar price range as new five-roomers launched at Punggol Regalia in December at $342,000 to $428,000, and Punggol Arcadia in November at $356,000 to $416,000.
Even prices at the lower end for Punggol’s premium four-roomers have fallen from around $338,000 in December to $306,000 last month.
First-timers eligible for housing grants that may reach as much as $70,000 could now be paying much less for a resale flat than a new one.
This could prompt some cost-conscious buyers in the queue for new flats in Punggol to drop out and buy resale ones, said ERA Asia-Pacific’s associate director, Mr Eugene Lim.
Analysts say the dip in prices has come as home buyers are less likely to pay a premium, or cash-over-valuation, for a flat amid a deepening recession where every quarter sees fresh layoffs.
When HDB launched the Punggol flats late last year, the prices were also based on earlier, higher-priced transactions so it was ‘inevitable’ for new and resale flat prices to have some overlap.
A similar scenario was seen in the 1998 Asian financial crisis when new flat prices were ‘outdated’ quickly due to a downturn in the property market, said PropNex chief executive Mohamed Ismail.
One such area was Jurong, where some first-time buyers eventually discovered they paid more for a new flat than for some resale flats, he said.
It is difficult to compare that situation to Punggol now as the latest projects launched have a premium price due to their attractive location near Punggol MRT station and proximity to the town centre.
Punggol also has long-term potential due to plans to transform it into Singapore’s first waterfront public housing estate, added Mr Ismail.
Chesterton Suntec International’s head of research and consultancy, Mr Colin Tan, pointed out that, unlike private developers, the HDB does not have the luxury of flexibility to adjust prices according to the market immediately.
‘Once they’ve launched, the price is fixed. So there’ll always be a lag effect,’ he said.
One outcome might be that if the projects do not sell out, the HDB will take back surplus flats and relaunch them at a more attractive price later, he said.
Engineer Tang Zhi Wei,who is in the queue to buy a flat at Punggol Regalia, said the prices of resale flats are starting to look very attractive.
‘I’d be tempted to drop out and get a resale flat if time was important and I couldn’t wait,’ said Mr Tang, 26.
But while it seems he is no longer getting a ‘deep discount’ for a new flat, he will still buy one as it is ‘new and the location is good’.
The HDB has stated previously that it follows the market and adjusts prices accordingly.
In the aftermath of the Asian financial crisis when the property market suffered a severe downturn, new flats in Sengkang, for example, cost up to 30 per cent lower in 2005 than when they were first offered for sale in 1997 to 1998.
Source: Straits Times - 6 Mar 2009