The rise in Housing Board resale flat prices is accelerating again – after taking a slight breather early this year.
Preliminary estimates released by the HDB yesterday show resale HDB flat prices rose 3.8 per cent to a fresh record in the second quarter compared to the first quarter.
This is the eighth straight quarter that resale flat prices have broken records since 2008 when they surpassed the levels of the 1996 property peak.
Property analysts are now dramatically revising their full-year estimates for resale flat price rises – from 5 to 8 per cent previously, to 12 to 15 per cent.
Earlier this year, analysts had expected resale flat price increases to moderate when HDB figures showed prices rising 2.8 per cent in the first quarter over the previous quarter.
This rate of increase was slower than the 3.9 per cent in the fourth quarter of last year, and led industry observers to predict a moderation in price growth.
But the economic environment has changed. ERA Asia-Pacific associate director Eugene Lim said the outlook for the local economy ‘is strong and the jobs market has picked up significantly’.
This has sustained the high level of demand for resale flats, and as supply is still tight for resale flats, prices have continued to grow, said Mr Lim.
Even though HDB has aggressively ramped up the supply of new flats – it launched 2,696 flats on Wednesday, the largest ever single launch – these cater to first-time buyers and those who are able to wait three years for the flats to be built, he said.
‘For upgraders, permanent residents and those with immediate housing needs, the resale market is the only source.’
Associate Professor Sing Tien Foo of the National University of Singapore’s real estate department says rising prices will hit new home-buyers hardest. ‘For existing HDB homeowners, however, there is a ‘wealth’ effect, which may induce them to upgrade to bigger or private flats,’ he said.
Analysts said yesterday the price increase was also likely due to higher cash-over-valuation (COV) premiums. COV refers to the cash paid upfront by buyers above the valuation of a flat.
While HDB will release full figures – including COV numbers – only in a few weeks, two top property agencies ERA and PropNex said the median COV for second quarter sales shot up to $30,000.
This is up from the median COV of $25,000 seen in the first quarter, according to HDB’s figures.
HDB said yesterday it would continue to release adequate supply to meet housing demand. It has so far offered 8,828 new flats in the first half of the year – equivalent to the supply for all of last year.
But Prof Sing noted that the new supply would take even longer to enter the resale market, due to the five-year minimum occupation requirement before an owner can sell.
He added, however, that the 3.8 per cent rise in resale prices is still relatively small compared to private property prices, which shot up 5.2 per cent this quarter, and 5.6 per cent in the first quarter.
‘In the public market, where supply is regulated, prices will respond more slowly than the private markets. The price increases in HDB resale will lag private market price increases.’
Source : The Straits Times © Singapore Press Holdings Ltd. Reprinted with permission.