First-quarter dip is first since 2006 and points to end of record run PRICES of HDB resale flats fell in the first quarter of this year - the first decline since 2006 and a sign that the two-year run of record-breaking gains has ended.
Flash estimates yesterday showed that prices dropped by 0.6 per cent for the first three months, compared with the fourth quarter of last year.
Prices in the fourth quarter had increased by 1.4 per cent over the previous period and helped drive resale flat prices up by a hefty 31.2 per cent over the past two years.
The latest numbers caught industry experts by surprise and underline how the worsening recession has hit the Housing Board (HDB) market sooner than expected.
Many analysts had predicted further increases in resale prices with a decline becoming apparent only later in the year.
Agency chiefs from both PropNex and ERA Asia Pacific had recently forecast that HDB resale prices could rise by a further 3 per cent to 5 per cent this year.
But yesterday's numbers have altered expectations overnight, with analysts now predicting a decline of anything from 2 per cent to 10 per cent this year.
Tell-tale signs in the market signalled that prices have started heading southwards, in tandem with private property prices, which plunged 13.8 per cent for the first quarter of this year, said Prop- Nex chief executive Mohamed Ismail.
'The gloomy outlook for the past few months, coupled with more retrenchments, have hit home, and even the HDB market is feeling it,' said Mr Ismail.
PropNex and ERA have reported buyer resistance to flats above $500,000, with five-room and executive flats feeling the brunt of the price slide.
Such flats are now being sold at below valuation, in some cases up to $40,000 under, said ERA associate director Eugene Lim.
However, there is still strong demand for three- and four-room flats as buyers and permanent residents go for the safer option, he said.
ERA transactions showed that four-room units made up 41 per cent of its sales in the first quarter, compared with 38 per cent in the fourth quarter last year.
Despite the slight dip in prices, HDB flats are generally 'still holding' due to relatively strong demand, say experts.
Valuations of bigger flats are also likely to be lower in the face of decreasing transaction prices.
'This will have the multiplier effect of bringing down prices for these flat types,' said Mr Lim.
HDB's latest numbers did not surprise Knight Frank's director of research and consultancy, Mr Nicholas Mak, who had predicted bearish numbers from last year.
'HDB prices cannot go against the broad economic trend, when almost all asset prices are depreciating,' he said.
Chesterton Suntec International's head of research, Mr Colin Tan, said it is logical that HDB resale prices have 'turned a corner', partly because the supply of attractively priced new flats has increased.
As demand for HDB resale flats has relatively eased, so have their prices, and they will fall gradually from here, although not drastically, he added.
ERA and Knight Frank are estimating a decline of 5 per cent to 10 per cent over the year, while PropNex has put it at 2 per cent.
Demand for resale flats will continue to come from permanent residents, people downgrading from private properties to HDB flats and those downgrading from larger to smaller homes, said ERA's Mr Lim.
He expects total resale transactions for this year to be around 30,000 units, compared with last year's 28,419 units, with three- and four-room units making up the bulk of sales.
Demand for smaller flat types looks set to remain high amid the recession.
HDB's quarterly sale of 150 two- and three-room flats spread across Punggol, Queenstown, Sengkang and Yishun attracted 427 applications yesterday by the close of its first day.
Source: Straits Times, 2 Apr 2009
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