THE public housing market - the only property segment still growing - suffered a sharp fall in transaction volume in the fourth quarter of 2008. HDB’s Resale Price Index rose just 1.4 per cent - a marked slowdown from 4.2 per cent in Q3 and 4.5 per cent in Q2.
Analysts had expected price increases to moderate because the economy was losing steam.
But what has taken some by surprise was the steep drop in transactions.
The number of resale homes sold fell 24 per cent, from 8,110 in Q3 to 6,190 in Q4 - the lowest Q4 volume ever, according to one analyst.
The poor showing meant total transaction volume for 2008 was 28,419 units - 1,926 fewer than 2007’s 29,436.
The median cash-over-valuation (COV) amount in Q4 also fell, by $4,000 to $15,000. Sales involving COV constituted 85 per cent of all resale transactions, 4 per cent fewer than in Q3.
‘ERA’s resale transaction volume for Q4 was quite stable and that led us to predict resale volume of about 30,000 units for the whole of 2008. So the overall dip certainly caught us by surprise,’ said Eugene Lim, associate director for ERA Asia Pacific. ERA says it has a 45 per cent share of the HDB resale market.
One of the main reasons for the dip could be that COV amounts have been falling. ‘The days of transactions involving more than $50,000 COV are over,’ said Mr Lim. Unusual exceptions are well-renovated flats with unobstructed, panoramic views.
With the economy likely to shrink further and more lay-offs on the way, home buyers have become sharper, analysts say.
They start by making offers below valuation, and many deals now are closed at valuation, or at most a COV of $5,000-$30,000.
Propnex chief executive Mohamed Ismail said that this is ‘indeed a buyer’s market’. The dip in 2008 transaction volume can be explained partly by the financial crash in October and partly by fewer launches, which led to fewer upgrading transactions.
Another reason for the dip could be that HDB plans to increase the supply of new flats in 2009. With this, buyers have more choice, so demand is taken away from the resale market.
Demand for public housing is still expected to grow this year, but probably not at the double-digit pace of 2007 and 2008. Mr Ismail expects the resale price index to grow 3-7 per cent in 2009, with smaller (three and four-room) flats accounting for 5-8 per cent growth and larger flats seeing slower one to 3 per cent growth.
‘If the economy doesn’t improve there will be more downgraders and increasingly cautious buyers in the wake of retrenchments and tighter budgets,’ he said. ‘But we should still see growth because demand exceeds supply.’
The public housing sector is also expected to get a boost from the Government’s Budget announcement on Thursday that it will widen the Additional CPF Housing Grant (AHG) for first-time home-buyers.
To ensure that public housing remains affordable for first-timers, the Government has decided to increase the maximum grant to $40,000, from $30,000. At the same time, the household income ceiling will be raised from $4,000 to $5,000.
An extra 2,700 first-time buyers will benefit from the enhanced AHG every year, taking the number of beneficiaries of the scheme to 8,000 a year.
Analysts reckon that this will boost demand from first-timers who look to the resale market rather than waiting for new homes to be completed by HDB.
Source: Business Times - 24 Jan 2009