Saturday, October 24, 2009

HDB resale prices at record high

Up 3.6% in Q3, with 11,649 units sold; cash top-ups also soar

PRICES of resale Housing Board homes have continued their relentless climb, rising another 3.6 per cent in the third quarter to hit a fresh record.

But despite the high prices, demand for resale flats remained hot. A total of 11,649 homes changed hands in the third quarter, reaching a level not seen in five years.

The latest figures, released by HDB yesterday, highlight another important trend. Almost 80 per cent of resale flats were sold above their bank valuations.

And this amount, known as the ‘cash-over-valuation’ (COV) – or the cash top-up payable by buyers – quadrupled from a median of $3,000 in the previous quarter to $12,000.

Together, the numbers show that resale HDB flats are not just becoming more expensive, but homeowners have to fork out more cash to buy them.

Analysts said yesterday that the feverish buying activity had been fuelled by recent positive economic sentiment, and also some panic buying.

Chesterton Suntec International’s research and consultancy director Colin Tan said that with resale prices surging upwards, more people are buying earlier in anticipation of more price increases.

‘The problem is, many buyers put off their purchases during the height of the recession. As resale prices start to run up, panic sets in and buyers, including PRs, start to buy at all costs, which adds further to the demand,’ he said.

COVs have been on a see-saw ride for the past two years. During the 2007 property boom, the median cash top-up for all flat types hit a record $22,000 in the fourth quarter, driving many home seekers to queue for new HDB flats.

Then, as the global recession tightened its grip on the economy, prices fell faster than bank valuations of flats.

Cash top-up values came down to almost zero and just a quarter ago, close to half – 43 per cent – of all sales were done at or below valuation.

Now, it seems the days of low cash top-ups are over and ERA Asia-Pacific associate director Eugene Lim believes they will continue to rise in the short-term.

‘We estimate the median COV for next quarter to be $15,000 to $18,000,’ he said.

The rising cash top-up figures were confirmed by HDB data, which shows them spiking in popular areas such as Marine Parade and Yishun, reaching a median of $20,000 for five-roomers.

Analysts said rising prices – they have risen 4.2 per cent since the beginning of the year – and cash top-ups will drive young couples back to the queue for new HDB flats, especially those who are cash-poor.

Prices ‘unlikely to ease’

And this will put even more pressure on the Government to quickly supply new units to meet burgeoning demand.

HDB recently addressed the problem by announcing the release of 7,000 new flats from October to December.

It added yesterday that it will offer 4,000 flats under its build-to-order scheme in Punggol, Bukit Panjang, Sembawang and Dawson in the next two months. It recently launched 1,200 new flats in Sengkang and Jurong West, which have attracted 3,007 applicants to date.

The release of these new flats could help to ease the rise of resale flat prices somewhat, said some analysts.

But others like ERA’s Mr Lim also felt that the new supply would have minimal impact on resale prices. He noted that most buyers in the resale market either do not qualify for new flats (like singles and PRs) or qualify but are unwilling to wait three years for them to be built.

This is why industry observers expect resale prices to continue to rise.

PropNex chief executive Mohamed Ismail thinks prices will likely rise another 2 to 3 per cent over the next quarter.

But while HDB’s latest figures may ‘fuel the ire of those who bemoan high COVs’, Mr Ismail says the data brings good news to existing HDB owners.

‘This is a prime opportunity for them to upgrade their property or gain cash by selling their flat – especially those who bought at the previous price peak in 1996,’ he said. ‘Their property assets would now see positive cash flow.’

Source: Straits Times, 24 Oct 2009

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