Cash over valuation now $30,000 even as supply of new flats increases
RESALE prices for HDB flats have smashed records for the eighth straight quarter with a surge of 4.1 per cent in the April to June period.
Prices passed the 1996 peak back in 2008 and have not looked back since.
And the march shows no sign of letting up, with median cash over valuation (COV) at a record $30,000 in the second quarter.
This is 20 per cent ahead of the $25,000 in the January to March quarter.
COV is the cash paid upfront by a buyer over a flat's valuation, and is often an indication of demand levels.
The HDB figures out yesterday show resale prices are almost 18 per cent above the previous peak in the last quarter of 1996.
Meanwhile, the HDB said yesterday it launched almost 9,000 new flats in the first half - equal to last year's total supply - and will launch another 7,200 in the second half to meet demand.
It will launch 1,000 new flats in Jurong West and Bukit Panjang this month. The total home supply will be complemented by 4,700 new homes under HDB's design, build and sell scheme (DBSS) and recently sold executive condo sites.
Despite this, resale activity keeps growing. Transactions hit 9,114 in the second quarter, up about 7 per cent on the first.
Nearly all deals involved cash paid upfront. The percentage of resale transactions done above valuation increased to 96 per cent, up from 93 per cent in the previous quarter.
The pace being set by buyers and sellers has also prompted fresh concerns on whether the market is overheating.
In estates like Queenstown the median resale price for an executive flat was an eye-popping $781,500 in the second quarter and $685,500 in Bishan.
The median resale price for five-roomers was $682,500 in Marine Parade and $675,000 for Queenstown.
Associate Professor Sing Tien Foo of the National University of Singapore's real estate department noted that apart from the price index surpassing the 1996 peak, it has also increased by more than 60 per cent compared with 2003 prices.
He said that price increases appear to be supported by strong economic fundamentals for now, with demand coming from upgraders, downgraders, PRs and home buyers who cannot wait three years for new HDB flats.
As government policies on resale flats discourage speculation, this price growth is unlikely to be a housing bubble, observed ERA Asia-Pacific associate director Eugene Lim.
Prof Sing added: 'But if price rises continue unabated, we should be concerned. When deviations from fundamentals are too large, some corrections in prices could occur.'
Mr Lim noted that the robust resale market is having a spillover effect on private property as HDB owners can upgrade thanks to the relatively high prices they can get for their flats.
Values in the private property market rose 5.3 per cent in the second quarter over the first despite slowing sales.
But as private property prices inch up, some buyers in that market could turn to the HDB resale sector, adding to demand, said PropNex chief executive Mohamed Ismail.
Some analysts believe prices have reached a new era.
'Property prices move in cycles and prices will go up and down. But generally, it will move in an uptrend due to scarcity of land in Singapore,' said Mr Lim.
'Even if prices come down, I think it'll still be higher than five years ago. It is unlikely we will go back to that level.'
While property agents say home buyers - especially first-timers - are getting increasingly disgruntled about blazing resale prices, some estates are still selling at levels below the 1996 peak.
PropNex agent Steven Ng, who recently helped a couple in their 50s sell a five-room Bishan flat for $615,000 - $70,000 above valuation - said the sellers were happy as they bought it at less than half that amount more than 10 years ago.
'But some sellers in Bishan who bought at 1996 peak have still yet to see price levels at the price they paid,' he said.
Source: Straits Times, 24 Jul 2010