PRIVATE home prices in Singapore have inched up to a new record high though the once rapid rate of increase has again moderated as buyers turn cautious.

Analysts say their caution is the result of higher asking prices, uncertainty over possible new government property measures and a slowing economy.

Prices in the sector rose 2 per cent in the April to June quarter, slowing from 2.2 per cent in the previous quarter, according to Urban Redevelopment Authority figures released yesterday.

It was the seventh straight quarter of moderation. Landed property posted the biggest gains of 3.6 per cent.

This overall 2 per cent gain is, however, a slight rise from the 1.9 per cent flash estimate released earlier this month, indicating that sales recorded in the last two weeks of the quarter continued to show some price increases.

The slowing rises suggest a stabilised property market, analysts say, with runaway prices unlikely now that the number of new private home sales has fallen in recent months as well.

Total sales volume in the primary and secondary – or resale – market has also fallen 18 per cent in the six months to June from the same period last year.

‘Home buyers have begun to resist the higher asking prices by sellers and they have also become more selective. There are some uncertainties as they await clearer housing policy directions from the Government,’ said ERA Realty key executive Eugene Lim.

Tighter lending rules and sellers’ stamp duty of up to 16 per cent have helped weed out speculative purchases.

The Housing Board’s move to ramp up new flat supply has also helped calm demand and thus prices, said PropNex chief executive Mohamed Ismail.

Across the various segments – whether landed homes or condos, on the city fringe or suburban areas – prices largely slowed their pace of increase as well.

One exception was homes in the city centre, which saw values gain 1.6 per cent in the second quarter – quicker than the 1.1 per cent rise in the previous quarter.

The outlook for home hunters is positive, with experts predicting a continued price slowdown for the rest of the year.

They cautioned that while the residential market is still driven by low interest rates and ample funds, sentiment will be tempered by the record home supply in the pipeline, tepid global economic conditions and expected housing policy shifts.

PropNex’s Mr Ismail said that data from his firm’s transactions showed median per sq ft (psf) prices already falling across the island this month.

He expects prices to edge up a further 3 per cent to 4 per cent in the second half of the year.

Mr Png Poh Soon, Knight Frank’s head of research and consultancy, expects an 8 per cent to 10 per cent jump in prices for the full year, significantly slower than the 18 per cent advance in prices last year, though still healthy by any standards.

Developers, however, may find themselves in a delicate situation in the light of the general slowdown and uncertain market sentiment, he added.

‘Good quality developments will continue to attract demand, but they must be priced attractively to entice home buyers especially with the prospects of a quiet Hungry Ghost Month looming ahead.’

Private home rental growth also held steady with a slight increase of 1.3 per cent – marginally faster than the 1.2 per cent uptick in the previous quarter – led by rental growths in the semi-detached and terraced landed housing segments.

The broad-based softening also affected other property sectors, with the office and industrial segments mostly taking a hit. Gains in rents and prices mainly held steady or moderated quarter-on-quarter.

Cushman & Wakefield senior manager of Asia-Pacific research Ong Kah Seng said this reflected the effect of an economic slowdown and the increased price sensitivity of tenants as business costs rose.

Office rents, for example, inched up 1.5 per cent from 5.4 per cent the three months before, while prices rose at a slower pace of 3.6 per cent from 4.9 per cent.

‘The office property sector is expected to achieve continued leasing and rental growth momentum, although (tenants) may be increasingly realistic in the face of modest economic growth, increased business costs and more space options,’ Mr Ong added.

Price growth for industrial space eased to 5.5 per cent from 8.3 per cent, while rents slowed to 5.7 per cent from 6.3 per cent.

Shop space values, however, gathered pace to 1.1 per cent from 0.5 per cent in the first quarter as rents held steady with a 0.8 per cent increase.

Source: Straits Times, 23rd July 2011

Mr Mohammed Yunus Musa showing Mr Khaw the keys to his new flat, which he had just received at HDB Hub yesterday. In the centre is Mr Lim Kee Siong, who had selected a flat earlier and was at the HDB Hub to sign sales documents. — ST PHOTO: MUGILAN RAJASEGERAN

IT IS wrong to compare the prices of the latest Build-to-Order (BTO) flats – offered last week – and those launched in May and conclude that the Housing Board’s prices for new flats are coming down.

National Development Minister Khaw Boon Wan said this yesterday and added that there is no reason for a sharp decline in prices unless market sentiments dip.

Speaking to reporters after his first official visit to the HDB Hub, he noted that ‘pricing a flat is quite tricky as there are many factors at play’, citing variables like the floor the unit is on, location and proximity to amenities like MRT stations.

The prices of HDB’s new flats are typically pegged to prevailing resale prices but are discounted.

Referring to previous media reports, Mr Khaw noted that in each BTO launch, there is a range of products ‘so you cannot just look at the July BTO, the lowest is so much, and then the May one, and say there is a 18 per cent drop’.

In last week’s launch of 3,600 BTO flats in seven locations in Sengkang, Tampines, Jurong West, Bukit Panjang and Yishun, the indicative starting prices for three-, four- and five-room flats were $137,000, $217,000 and $274,000.

In May, the starting prices for 4,000 BTO flats in Pasir Ris, Punggol, Tampines and Woodlands were $166,000, $264,000 and $335,000 respectively.

Calling broad-based comparisons akin to comparing apples with oranges, Mr Khaw added: ‘What I’m trying to achieve at this stage is to try to stabilise the pricing. So you can largely see that prices are not increasing but it is also not dropping sharply because there’s no reason to… unless the market begins to drop.’

Market watchers have said the BTO rollouts in May and last week, after Mr Khaw assumed the National Development portfolio, demonstrated his commitment to ramp up supply aggressively to alleviate demand while being cost-effective.

According to official estimates, resale flat prices have climbed a further 2.9 per cent in the second quarter, following a 1.6 per cent increase in the previous quarter and a 14.1 per cent hike last year.

Data from real estate agencies also indicated that cash premiums, paid on top of a flat’s valuation, have been rising as much as 50 per cent to $32,000.

This is likely to affect price-sensitive first-timers most.

In new flat launches, 95 per cent of the supply is set aside for first-timers.

Mr Khaw also referred to his recent blog post on Sunday, which said that almost all applicants who ballot for a unit that is twice oversubscribed would get a chance to select one because many applicants back out. Calling such data crucial to him as a policymaker, he said that ‘I need to know this – that a subscription of two practically means a 100 per cent chance’.

Applying this principle to May’s BTO, which was about four times oversubscribed, he added: ‘I can be assured now that I think quite a big number will have a chance to say ‘yes’.’

On the topic of larger, combined launches which he advocated for last month to reduce the frequency of repeated disappointment, he said: ‘The key is that you must push out more, and (with a) wider range. So previously, when HDB releases small launches, in fact, it’s worse.

‘Each time you release a few hundred units, everybody rushes for these hundred units and many will get disappointed for sure.’

So far, 15,500 new flats have been launched this year. HDB has said it is on track to offer 25,000 in all by year-end.

Asked if more flats would be released next month, Mr Khaw said while he could release them in small batches, he saw ‘value in having sufficient critical mass’, and that he would be combining the next two months’ launches into one.

A review of the income ceiling for first- timers to buy BTO flats, as well as the Design, Build and Sell Scheme (DBSS), is still under way, he said.

Right now, the monthly household income qualifying criteria is up to $8,000.

Mr Khaw also explained why prices for new flats and surplus ones under the Sale of Balance Flats (SBF) exercise are different.

‘Because they (SBF) are almost available, so pricing them would have to be different. Because if the product is available next month, versus three years’ time, obviously you have to price it differently, otherwise it would not be fair to those buying BTO flats today,’ he added.

To supplement the main flat supply this year, Mr Khaw also promised 2,000 surplus flats, none of which has been launched to-date.

Source: Straits Times, 19th July 2011

KUALA LUMPUR: A new government scheme to build affordable homes for young middle-class Malaysians has been given the thumbs-up by prospective buyers, with some real estate analysts comparing them to Housing Board flats built in Singapore.

The apartments, to be built in Klang Valley, will be priced some 20 per cent lower than similar flats being sold on the open market – plugging a gap between low-cost housing for poor families and increasingly expensive condominiums in the city.

Called the 1Malaysia Housing Programme (PR1MA), the scheme forms another plank in Prime Minister Najib Razak’s efforts to improve national policies and address public concerns.

Young Malaysians earning RM6,000 (S$2,400) or less a month will be eligible to buy the flats, which will be priced from RM150,000 to RM300,000 – lower than the RM400,000 usually required for a mass-market condo or a terrace house in Kuala Lumpur and its suburbs.

Meant to help first-time buyers, the scheme not only offers 100 per cent loans but also allows buyers to borrow money to cover the legal fees. Buyers must occupy the flats and cannot sell them for 10 years.

‘The concept is similar to Singapore’s HDB scheme,’ noted property analyst Steven Tan, who said the response so far had been positive. ‘Now everyone can own property.’

Agreeing, teacher Ida Zainal, 33, said: ‘It’s good because it encourages people to buy homes early, before they rack up credit-card and other debts.’

Launched by Datuk Seri Najib last week, the PR1MA scheme comes amid a sharp rise in property prices caused by speculative buying. The rise has made many condos in and around the capital too expensive for middle-class Malaysians.

‘The government is aware of difficulties faced by the moderate-income group, who cannot afford to purchase high-priced houses but, at the same time, are not eligible for the existing low-cost public housing programme,’ Mr Najib said while launching the first project in Putrajaya.

Construction of 42,000 units, ranging in size from 800 sq ft to 1,400 sq ft, will begin this year in Kuala Lumpur and its suburbs. The units will be built by government-linked property developers such as Putrajaya Holdings and Sime Darby.

Datuk Seri Michael Yam, the president of the Real Estate and Housing Developers’ Association, said the scheme should succeed if the flats were not located too far from city centres and had access to good infrastructure.

As he told The Straits Times, inaccessibility would put off would-be buyers because, for many, it would cost less to just rent a home near their workplace.

Mr Tan noted that the locations announced so far have been attractive. The sites in Sungei Besi and Cheras are close to downtown Kuala Lumpur, he observed, while others are near popular town centres such as Puchong and Subang.

Source: Straits Times, 16th July 2011

Prices start from $137k for 3-room flat and $274k for 5-room unit

Segar Meadows in Bukit Panjang will have three- and four-room flats. — PHOTO: HDB

CHEAPER prices – and a wide range of new flats – are the big draws for first-time buyers in the latest launch of Build-to-Order (BTO) flats.

The Housing Board (HDB) is offering 3,556 flats in seven locations in Sengkang, Tampines, Jurong West, Bukit Panjang and Yishun.

Indicative prices for the three-, four- and five-room flats are cheaper than those in previous BTO projects.

They start from $137,000 for a three-room, $217,000 for a four-room and $274,000 for a five-room flat.

The starting prices were $166,000, $264,000 and $335,000 for the same flat types in May’s launch of 4,000 new flats.

The lower prices announced yesterday come even as the HDB resale price index continues its upward march – suggesting a widening price gap between new flats and resale ones.

HDB’s new homes are typically pegged to resale prices but are discounted.

The new launch follows National Development Minister Khaw Boon Wan’s recent pledge to combine launches. In a previous blog post, he had noted that large ones ‘offer buyers a wider range of choices and reduce the odds of repeated disappointment’.

‘I am therefore working with HDB to see how the June and July launches can be combined for a larger launch. And I will price them wisely,’ he had said.

Analysts whom The Straits Times spoke to said yesterday’s rollout demonstrates Mr Khaw’s commitment to aggressively ramp up supply in a cost-effective manner to relieve the hot demand for homes.

Current median cash premiums – paid on top of valuation – for resale flats have risen to about $32,000 from $21,000 in the last quarter, noted property agency PropNex spokesman Adam Tan, which hurt more price-sensitive first-time buyers.

HDB resale flat prices have climbed a further 2.9 per cent in the second quarter according to official estimates – on the back of a 1.6 per cent increase in the first quarter and a 14.1 per cent hike last year.

He noted that though the new launch’s lower prices could be due to the location of the flats, there was a distinct trend of offering a bigger discount.

‘In the past, new flats were discounted at a range of 15 to 25 per cent from similar resale flats in the area – we are seeing this range expanded to 23 to 32 per cent now,’ Mr Tan said.

Mr Nicholas Mak, head of research at SLP International, said the attractive pricing will further alleviate demand in the resale market and shift first-time buyers’ preference to HDB’s new flats.

The launch yesterday offers 381 studio apartments in Tampines and Jurong West – ranging in price from $83,000 to $96,000.

There are 459 three-room, 1,674 four-room and 1,042 five-room flats – with the option of standard and premium finishes – in Sengkang, Bukit Panjang and Yishun at a price range of between $137,000 and $421,000.

The launch will bring HDB’s supply of new flats this year to about 15,500. It said yesterday it is on track to deliver 25,000 new BTO flats for this year.

Mr Tan expects the new flats to be ‘very well received’.

As of 5pm yesterday, HDB had received 1,541 applications for the 3,556 flats.

The closing date is next Wednesday.

Source: Straits Times, 15th July 2011

PRICES of new suburban homes were up in the second quarter but the pace of those rises slowed, probably because developers launched projects in less popular areas.

Suburban prices rose 1.6 per cent in the three months to June 30, well under the increases of 3.1 per cent recorded in the first quarter. The figures are from flash estimates released by the Urban Redevelopment Authority yesterday.

Some property watchers said projects in less popular locations – perhaps farther away from transport links and community facilities – may have resulted in lower selling prices of some suburban homes. Savills research head Alan Cheong said some new residential projects launched in April may not be in locations as attractive as those launched earlier. His own analysis showed that prices of mass-market homes dipped 5 per cent quarter-on-quarter to $975 per sq ft.

Ms Chia Siew Chuin, Colliers International’s director of research and advisory, said price resistance is setting in with buyers becoming increasingly cautious and price-sensitive towards homes in suburban areas. The second quarter recorded an overall price increase of 1.9 per cent. Prices of homes in prime districts rose 1.6 per cent while those on the city fringe increased by 1.2 per cent.

Many analysts agreed that the several rounds of cooling measures are making their presence felt.

Credo Real Estate’s head of research and consultancy, Mr Ong Teck Hui, said new projects will have to be priced realistically to get healthy sales.

Source: Straits Times, 2nd July 2011

RESALE flat prices have risen partly because of a falling supply, experts told The Straits Times yesterday.

The prices jumped by 2.9 per cent over the past three months – compared with an increase of only 1.6 per cent in the quarter before, Housing Board figures showed.

Analysts put this down to a significant drop in the number of resale flats on the market.

They gave several reasons for the supply crunch. First, some HDB flat owners are hanging on to their units because rising private property prices mean it is too expensive for them to upgrade.

ERA Realty’s key executive officer Eugene Lim said: ‘Many HDB upgraders have found private property prices, especially those of mass market condos, out of reach, so they postpone upgrading plans.’

Another possible factor behind the supply crunch is the rule issued in August last year that requires those buying HDB units to sell their private property within six months.

Mr Lim said the rule could deter those who have upgraded to a private apartment from putting their HDB flat on the market.

This is because they would be unable to buy another HDB flat without getting rid of their private apartment. ‘Were upgraders to want to buy a flat again, they would have to sell off their private property,’ he said.

Those in this situation who decide to sell their private apartment to get an HDB flat will subsequently have to wait five years before they are eligible to buy another private property because of the increase in the minimum occupancy period (MOP) for HDB flats in August last year.

‘HDB dwellers who are able to upgrade after the MOP is up might choose to sublet their whole units instead and collect rent to defray other costs,’ said Mr Lim.

SLP International’s head of research Nicholas Mak said those with existing home loans could be being put off upgrading because of a change in the law in January which means they cannot borrow more than 60 per cent of the value of the property they want to buy.

‘Most flat owners with existing mortgages are unable to cough up the 40 per cent cash, even more than that when legal fees and stamp duties are included,’ he said. ‘This means they would have to sell before getting another loan and have nowhere to stay in between.’

PropNex chief executive Mohamed Ismail said high demand could be another factor behind the rising flat prices.

Buyers who held back to assess the impact of cooling measures brought in earlier this year could now be coming back into the resale market. ‘However, there are still many HDB owners who are reluctant to sell, resulting in a supply crunch,’ he said.

Mr Mak added that he is seeing fewer HDB upgraders based on his data gathered from government figures.

Mr Lim said because of the limited supply, many transactions are being negotiated not on the flat’s actual price, but on its cash-over-valuation (COV) – the amount the buyer is willing to pay over and above the official value.

Fresh data from ERA Realty puts the median COV at $37,000 for last month, while PropNex’s median COV last quarter stands at $32,000, up from $22,000 in the previous quarter.

According to an earlier report sourced from real estate firms, median COVs rose by almost 50 per cent to about $30,000 between April and last month.

Calling the current trend of COVs unsustainable, Mr Ismail said the figure will likely hit $35,000 for this quarter, before settling to $32,000 by the year end. It will also dip further should the Government continue to provide new public housing at the current brisk clip.

Mr Ismail also estimates the HDB resale price index to increase by up to 9 per cent for the full year.

Source: Straits Times, 2nd July 2011

NATIONAL Development Minister Khaw Boon Wan has his work cut out to meet demand for public housing – while tempering prices – given new data about the red-hot market.

New figures show that HDB flat prices in the second quarter rose at their fastest clip since the third quarter of last year.

According to preliminary estimates, the Housing Board resale price index in the second quarter rose by 2.9 per cent to a fresh record from the previous quarter.

Resale flat prices in the first three months of the year rose 1.6 per cent in comparison.

Prices of private homes, on the other hand, increased at a slower pace in the second quarter.

The 1.9 per cent gain in the private residential property price index is the seventh consecutive quarter in which the rate of increase has fallen.

The data is mostly based on transaction prices in caveats lodged during the first 10 weeks of the quarter.

Taken together, the emerging picture is that of home buyers flocking to buy HDB flats and shunning pricier private homes.

A recent report by Goldman Sachs showed that the price gap between mass market private homes and HDB flats has widened to a record – making it harder than ever for aspiring HDB upgraders to buy a private home.

Analysts noted that HDB flats remain affordable despite public housing prices showing a sharper rise compared with private housing.

‘This is because private property prices, in particular mass market condo prices, have increased beyond the reach of many HDB dwellers who had intended to upgrade,’ said ERA Realty key executive Eugene Lim.

Four rounds of cooling measures since September 2009 – including lowering the loan quantum to 60 per cent for borrowers with more than one outstanding housing loan – and uncertainties in the global economy have done much to keep a lid on price increases for private homes.

But it is a different story for HDB flats.

First timers, HDB upgraders, private property owners who downgraded to public housing and permanent residents have stoked demand for HDB flats.

Although HDB has rolled out new build-to-order (BTO) flats in record numbers – about 25,000 new flats will be offered for sale this year – the fresh supply will take time to filter down to the market.

Some unintended consequences from stiffer HDB rules introduced last August, such as a blanket five-year minimum occupation period before flats can be resold, have resulted in fewer flats available for sale in the market.

PropNex chief executive Mohamed Ismail said the curbs have deterred many owners from moving or selling their flats, ‘resulting in a supply crunch and driving (up) median resale prices’.

While the flash estimates did not provide data on median prices or cash premium paid for a resale flat on top of its valuation – known as cash-over-valuation (COV) – ERA and PropNex records showed that both median prices and COV were up in the second quarter.

PropNex data showed that the greatest price increase was in the executive apartment segment, which rose 5.3 per cent to a median price of $574,500.

This flat type also saw the biggest increase in COV, up by 50 per cent to $45,000. Overall, COV for flats rose to $32,000 from $22,000.

ERA’s data also painted a similar picture.

As prices of private homes grew in inverse proportion to their size, some cash-rich home seekers are opting for executive flats for the generous space they afford and are willing to pay higher COV for them, analysts noted.

Providing affordable housing to first-time buyers is a key priority of Mr Khaw, who took over the housing portfolio from Mr Mah Bow Tan in May.

Rising home prices, particularly in public housing, is a major concern among first-time buyers.

Mr Khaw has acknowledged these concerns and has directed the HDB to speed up its offering as well as provide a wider selection of flat locations.

In its statement yesterday, the HDB said it will launch 2,000 flats under a sale of balance flats exercise next month. Some of these flats will be in mature estates.

The board is also on track to offer 22,000 BTO flats by September and a further 3,000 BTO flats in the fourth quarter.

Source: Straits Times, 2nd July 2011

Sellers taking cue from new launches as impact of cooling steps wanes

RESALE home prices continue to head north in tandem with pricier new launches in the second quarter, as the latest DTZ Research report shows steeper gains across all segments of the property market.

Industry experts cite various reasons for this upward price trend as the effect of January’s cooling measures begins to wane.

DTZ’s head of South-east Asia research, Ms Chua Chor Hoon, said asking prices of resale homes are continuing to trend upwards as sellers benchmark their home prices against those of new launches.

But with more caution in the market due to the expectation of housing policy reviews after the elections and as price resistance increases, the pace of price gains is likely to moderate for the rest of the year, she added.

Mr Tan Kok Keong, OrangeTee’s head of research and consultancy, added that the resale market is driven mainly by owner-occupiers, and they are now back in the market after the initial knee-jerk reaction to the cooling measures.

Cushman & Wakefield’s senior manager of Asia-Pacific research, Mr Ong Kah Seng, said the overall price increase could be partly attributed to buyers snapping up resale properties, as such homes are cheaper alternatives to new sales.

Resale homes are also more attractive to some buyers as they offer immediate occupation or an instant rental income stream.

‘The overall 2.5 per cent May price increase, however, does not reflect that the previous round of measures was ineffective, as this increase follows after consecutive months of subdued price gains following the cooling measures in January,’ he added.

Suburban leasehold condos saw the largest jump, with prices rising by 3.9 per cent in the second quarter, from the previous quarter. This is a significant increase from the 0.8 per cent seen in the first quarter of the year, DTZ’s analysis found.

Freehold condos in the prime districts of 9, 10 and 11 and luxury condos also registered higher quarterly resale prices, with a 3.3 per cent and 1.7 per cent gain respectively, against the rather flat prices in the previous quarter.

A monthly index by the National University of Singapore (NUS) has found resale prices of completed non-landed homes strengthening by 2.5 per cent last month compared with April’s prices.

This also represented a faster pace of price increase as April’s gain was a more subdued 1.1 per cent. While central home prices rose by 3.5 per cent, non-central home prices inched up by 1.7 per cent.

Cushman’s Mr Ong viewed the higher price increases for central homes in the NUS index as possibly ‘encouraging rather than cautionary’ as this is the only segment with prices yet to return to their previous peak in 2008.

Source: Straits Times, 29th June 2011

THE tempest whipped up over exorbitant asking prices for a privately contracted Housing Board project in Tampines said one thing: The public mood over property inflation remains raw. While home ownership is valued for social security planning, Singaporeans will push back when their fondest wish is taken for a weakness. Sim Lian Group, the developer of Centrale 8 in Tampines under the Design, Build and Sell Scheme (DBSS), then cut ‘indicative’ prices to what it called a ‘confirmed’ range. It now waits to see whether reducing by $65,000 for smaller units and $100,000 for bigger flats – from an ‘indicative’ price of $880,000 for the top of the range – is what the market will bear. Sim Lian could have gone ‘confirmed’ straight out and spared itself the impression that it was testing its luck. Indicative pricing is a distortion which can disrupt orderly workings of the market.

It can have an inflationary impact on other HDB projects, resale flats and entry-level condominiums in outlying districts. It should be buried forthwith – no tears shed. Developers have a lesson to take away from the episode. They have to get market signals right and be realistic about prices.

The HDB was not spared over the case, either, for the heat generated in last month’s election campaign over HDB pricing had not quite dissipated. A critical point in the outcry over Centrale 8 was whether the HDB, as over-seer of DBSS projects, should not have some say on pricing. Varying the conditions of land tender may also be advisable. Price volatility that could arise from current DBSS practice is a point for National Development Minister Khaw Boon Wan to ponder in the ministry’s review of the scheme.

But should the HDB keep morphing into a builder for all seasons and all wants? Has it not taken enough punishment – while receiving grudging praise from newer generations for creating what has been internationally recognised as the world’s most-admired public housing programme in modern times? Questions have been raised often about whether the HDB, after four decades of heroic duty, should return to its primary role of providing basic, affordable housing. The more cases of Centrale8 that emerge, the louder the clamouring will be. Singapore is fully housed. What passes for persistent consumer dissatisfaction is mainly, although not exclusively, about the complex needs of upgraders. All those differentiated HDB categories like executive condominiums may be better left to the imagination of the private sector. Private builders will then have to do a thorough job of evaluating market requirements, whereas buyers will have to stay attuned to market forces.

Source: Straits Times, 27th June 2011

After falling for two quarters, cash premiums paid for Housing Board (HDB) resale flats are on the rise again.

Fresh data obtained by The Sunday Times from real estate agencies shows the median premium, or cash over valuation (COV), paid in the April to June period has risen to about $30,000.

This is almost 50 per cent higher than the $21,000 median COV registered for the first quarter.

Last week’s figures reverse the trend of COVs falling after the Government moved last August to cool the housing market by restricting financing and tightening home ownership rules.

With sustained high demand for homes coming up against tight supply, the median COV is now close to the official record of $30,000 logged in the third quarter of last year.

COV is the amount a buyer pays over and above the valuation of an HDB resale flat. Because it must be paid in cash, it has a significant impact on affordability, and it is often used as an indicator of demand in the market.

The new figures were sourced from three of Singapore’s biggest property agencies – PropNex, ERA Asia-Pacific and the Dennis Wee Group (DWG) – which together account for about two-thirds of HDB resale market sales.

Spokesmen at smaller agencies – such as C&H Properties’ key executive officer Albert Lu – said their data also shows an increase of median COV to about $30,000.

But agency bosses note that their numbers might be slightly higher than HDB’s when official figures are finally released, because their sales data is captured at an earlier point of the buying process – when a buyer exercises his option to purchase a home.

HDB is set to release flash estimates for the second quarter this week.

The agencies’ data shows the median COV rising across most estates, with the increase especially pronounced in popular areas such as Bishan, Central and Queenstown.

According to PropNex, whose figures are based on sales closed from April to mid-June, the median COV for all flat types hit an eye-popping $55,000 in Central, $54,000 in Queenstown and $35,000 in Bishan.

These are steep increases from the median overall COVs of $27,000, $23,000 and $29,500 logged in the respective towns in the first quarter, according to official HDB figures.

Property analysts say the turnaround of COV levels is due to increased buying interest this quarter, and this is also reflected in the rising median resale flat prices.

Data from all agencies shows prices inching upwards across all flat types.

Based on DWG sales, for example, the median price of four-room flats went up by $4,000 in June to $398,000 compared to first-quarter figures. ERA Realty data shows the median resale price of five-room flats rose to $573,000 before dropping to $535,000 in June, compared to $550,000 in the first quarter.

Experts say that even though valuations are catching up with prices, COVs are still rising because of two factors.

First, demand is still strong because home buyers priced out from the private property market – which has also seen record high prices – are turning back to the HDB resale market.

Second, the supply of resale flats is shrinking as more owners are also taking their homes off the market, thanks to the effect of the recent rule changes.

‘Flat owners are reluctant to sell as many have been affected,’ said DWG director Chris Koh, referring to recent moves stipulating that banks can lend only 60 per cent of a home’s value on a second property.

This has made it difficult for any home owner who wants to buy a new home before he sells his current one, causing many of them to simply put off selling altogether.

C&H’s Mr Lu said demand in the resale market will likely remain high even though HDB is ramping up the supply of new homes. This is because these will take time to be built and enter the resale market.

Another interesting trend that has emerged from the data is that sales volume has dropped sharply from May to June.

DWG brokered 664 transactions in May, and 516 so far this month. At PropNex, the number of sales dipped from 434 in May to 142 to date.

On top of the shrinking number of sellers, some analysts attribute the June phenomenon to what they call the ‘Khaw effect’, referring to the slew of remarks made by newly minted National Development Minister Khaw Boon Wan since he took office.

Market observers say developers, home buyers and investors alike are adopting a wait-and-see attitude as they await clearer signals from the ministry.

In particular, they are looking to see if the Government will move to cool the market further if prices continue their upward march.

Still, most of Mr Khaw’s recent moves have been targeted at the market for new flats which cater to young couples, noted ERA Realty key executive officer Eugene Lim.

‘Key demand drivers of the resale market are upgraders and downgraders, permanent residents and those who cannot wait for new flats.’

But he added that further big price hikes are not likely as prices have already hit some resistance, especially for the larger flat types.

Mr Lu said agents are reporting that young buyers are holding back from buying resale flats after Mr Khaw said that HDB will look into offering more of its flats in mature estates, and this will also help cool demand somewhat.

This is exactly what potential home buyer Yvonne Koh, 27, and her boyfriend are hoping for.

‘We were thinking about resale flats but the COVs are going up. Now, there is a wider range of flats offered by HDB, so we will wait for the new flats,’ she said.

Source: Straits Times, 26th June 2011