(SINGAPORE) The Housing and Development Board (HDB) is stepping up its supply of new flats to meet increased demand for public housing. The news came as flash estimates showed that prices of resale HDB flats rose 3.2 per cent in Q3.
The price increase comes after a 1.4 per cent rebound in Q2 following a marginal drop of 0.8 per cent in Q1. This means HDB resale prices are now at their highest level ever. The previous two peaks were in Q4 2008 and Q4 1996.
Analysts attributed the growth to the greater demand for resale flats in recent months.
Observed Eugene Lim, associate director for ERA Asia Pacific: 'The surge in demand for HDB resale flats and the consequent rise in prices have been fuelled by a mix of upgraders, downgraders and the increasing population of permanent residents.'
There is also a 'trickle-down' effect from the growth in private property prices, which climbed 15.9 per cent in Q3.
But plans to boost the supply of new flats could mean that the price increase in the resale price index could see some moderation in future, said Minister for National Development Mah Bow Tan, who announced HDB's plans yesterday.
With the good response to recent build-to-order (BTO) launches, HDB will increase its supply of BTO flats from the 8,000 units previously planned for this year to 9,000 units instead. HDB launched 3,945 BTO flats from Jan to Aug 2009.
Now, potential home-buyers can look forward to another 5,000 new BTO flats over the next three months in various locations. This translates to an average of 1,500 new flats monthly, with at least two BTO project launches each month.
In addition, HDB also launched an exercise yesterday to sell leftover units from previous sales exercises. Under this scheme, 2,132 'balance flats' will be offered for sale. HDB expects these flats to be especially popular as most of them are either completed or close to completion, and a large chunk of them are in mature estates.
The new supply could take some pressure off the resale market, market watchers said.
'The grouses of many first-timers will be soothed as the introduction of these flats should, at least temporarily, ease the demand of resale flats,' said PropNex chief executive Mohamed Ismail.
Mr Ismail expects cash-over-valuation (COV) levels to dip slightly due to the immediate addition of the 2,132 balance flats to the market, and feels that this will actually encourage sustainable long-term growth of the HDB resale price index.
However, the increase in the supply of new HDB flats under the BTO scheme may not have the immediate effect of slowing down the price increase of resale flats because these flats would not be available immediately, said Ngee Ann Polytechnic real estate lecturer Nicholas Mak.
Transaction volumes and resale prices are expected to continue climbing in Q4.
ERA, which said it has a 45 per cent market share of the HDB resale market, observed that its transaction volume continued to increase by some 10 per cent in Q3, after surging by 52 per cent in Q2 over Q1.
'With the current market momentum likely to follow through till year-end, we are likely to see a similar price increase of 2-3 per cent for the last quarter.
For the whole year, HDB resale prices would probably have increased by 7-8 per cent,' said ERA's Mr Lim.
Mr Mak likewise said that for the whole of 2009, average HDB resale flat prices could increase by 5-9 per cent year-on-year as demand is still expected to remain healthy.
Source: Business Times, 2 Oct 2009
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