BUYERS of resale HDB flats now tend to need much less cash upfront to secure a home – and those looking at bigger flats may need none at all.

Data released yesterday by the HDB showed first-quarter median cash-over-valuation levels fell substantially to $4,000 in the first quarter, from $15,000 in the previous quarter.

This refers to the sum that flat buyers pay above a valuation set by HDB-appointed private valuers. Buyers can use Central Provident Fund money for any sum up to this level but need cash for any more.

The significant fall is attributable to twin factors – falling resale flat prices in a deteriorating economy and higher valuation levels, after a run-up in prices over the past year or so before recent falls.

HDB resale flats fell 0.8 per cent in the first quarter, just over the initial estimate of 0.6 per cent, after prices peaked late last year. However, resale prices are still at healthy levels, about 2 per cent above the 1996 peak, said Knight Frank’s director of consultancy and research Nicholas Mak.

Higher HDB valuations are why resale HDB prices dipped only slightly despite a far lower cash portion, said PropNex chief executive Mohamed Ismail. ‘It is evident that public housing remains resilient in this gloomy economy, thanks to continued strong demand for resale flats.

The alternatives, Build-To-Order and Design, Build and Sell Scheme projects, are still years away from completion.’

But things may change. ‘Generally, though valuations are still high, banks are becoming more conservative and there have been cases where buyers are offered only 70 per cent loans instead of the usual 80 per cent,’ said ERA Asia Pacific’s associate director, Mr Eugene Lim. That means more higher-value HDB resale flats are now being sold below valuation – in some cases, perhaps, up to $30,000 to $50,000 below, he said.

‘For larger flats, the days of transactions with cash-over-valuation are over,’ adds Mr Lim.

ERA’s first-quarter resale HDB deals show 21 per cent of flats sold below valuation, 19 per cent at valuation. Of the rest, most fetched no more than $15,000 cash, said Mr Lim.

First-quarter median sublet rents were unchanged for the smaller flats, and down $100 to $200 for the four-room and larger flats.

In the first quarter, more people bought smaller three- to four-room flats. Their prices fell a little.

The larger flats saw a slightly bigger price fall of up to 2.8 per cent for executive flats, said Mr Mak. These larger flats will continue to face stronger downward price pressure, property experts said.

They expect increased demand for smaller flats as home buyers exercise prudence. ‘In the coming quarters, we are likely to see more and more larger flats sold at or below valuation as the harsh economic conditions hit home,’ said Mr Lim.

The good news is that the fall in HDB resale prices is not expected to dent upgrader demand for private homes as the rate at which HDB resale flat prices are falling is still less than that of private homes, Mr Mak said.

Source: Straits Times, 25 April 2009

THE Housing & Development Board (HDB) yesterday launched a build-to-order (BTO) project at Punggol – the second of the year after one launched at Woodlands in February.

The 519-unit Nautilus @ Punggol, at the junction of Punggol East and Punggol Field, will have 413 four-room flats and 106 five-room flats.

Four-room flats will sell for $228,000-$274,000, while five-room flats will cost $305,000-$357,000. These prices are cheaper than those of similar flats in the market, which makes them affordable for first-time buyers, HDB said. Nautilus units are priced lower than recent BTO launches there mainly because of differences in location and design, it said.

Recent offerings Punggol Arcadia and Punggol Regalia are premium projects with enhanced designs and better internal finishes, while Nautilus is a standard project with more basic features. Nautilus is also further from the town centre and main transport than the other two BTO projects.
Nevertheless, analysts expect solid demand. ‘Nautilus is expected to be popular,’ said Propnex spokesman Adam Tan. The flats are ‘very attractively priced’.

Recent BTO offerings by HDB have seen strong demand. The Woodlands BTO project launched last month was more than four times subscribed.

And two other projects launched late last year – one in Choa Chu Kang and the other in Punggol – also saw good take-ups.

HDB intends to launch about 3,000 flats in Punggol this year as part of plans to remake the estate.

Source: Business Times. 27 Mar 2009

Units are smaller and cheaper due to design and location

CHUA CHOR HOON and LIM HUI LING compare the current situation with past downturns to gauge where we stand today in terms of oversupply and time to recovery

WITH the economic downturn, the residential market landscape has changed as developers shrink the size of units and offer steeper discounts to lure cautious buyers while banks tighten credit. So how will this downturn play out?

We compare the current situation, particularly in the mass market segment, with past downturns to gauge how prices are likely to perform and when recovery will be in sight.

The mass market segment has proved to be less volatile than homes located in the prime districts of 9, 10 and 11 – on the way up as well as on the way down.
While average prices of luxury homes rose 66 per cent during the property bull run in 2007, average prices of three-bedroom leasehold homes outside the prime districts only rose 27 per cent.

Gentler declines
Similarly, on the way down, mass market homes have seen gentler declines compared with higher-end condos. Last year, prices of luxury homes fell 30 per cent while average prices of non-landed three-bedroom leasehold homes outside the prime districts fell just 8 per cent to $560 per square foot as at end-2008.

The average prices of homes outside prime districts as at end-2008 are 33 per cent higher than the trough prices in 1998 and 27 per cent higher than the trough prices in 2003. However, they are 25 per cent lower than the peak in 1996 and 11 per cent lower than the peak in 2000.

However, the overall housing supply is much less compared with the level in 1998 which saw a supply glut in the public housing market. Around 31,600 public housing flats were completed each year between 1996 and 2000 compared with about 5,000 units completed annually in the last five years. To avoid over-building of flats, the Housing Development Board (HDB) had put in place the build-to-order (BTO) system in 2001 to provide the main supply of new flats.

Under the BTO system, construction will only start when a majority of the units have been booked and buyers would have to wait three to four years for the flats to be completed. HDB’s stock of unsold inventory is now estimated to be at a record low of under 1,000 units. Hence, the limited supply of new HDB flats will provide some support for the public housing resale market. This, in turn, should help hold up prices of mass market private homes.

The strong demand in the HDB resale market is closing the price gap between HDB flats and non-landed private homes, especially those in the suburban areas. However, there is room for the price gap to narrow further based on historical trends.

The price premium of private homes over HDB flats rose sharply in 2007 to unsustainable levels and will narrow as the private property market declines more steeply than the public housing market. Prices of HDB resale flats are likely to decline as the economy contracts further. The moderating rate of increase in the HDB resale price index and declining demand in Q4 2008 are signs of a weakening HDB resale market. Some HDB resale flats have already transacted below valuation this year. In this bearish scenario, private property prices would be further depressed. In Q1 2009, developers have already cut prices of new leasehold projects by 5-10 per cent.

So how long will this downturn last? The previous downturns lasted 2.5 to five years. While the property market saw a quick recovery after the 1998 Asian financial crisis, the recovery was slow after the 2001 Internet bubble burst, being compounded by a spate of adversities – the Sept 11, 2001 terrorist attacks, the Iraq war in 2003 and the Sars epidemic in 2003. The current downturn in the private residential market started only four quarters ago and is unlikely to bottom this year as the economic outlook is deteriorating. As to the timing and speed of the market’s recovery, that will hinge on the economic recovery of the major developed nations.

Going forward, developers are expected to resize the units of developments that have yet to be launched to make them more affordable. This would be aided by declining construction costs which would lower total development costs.

Purchases under IAS
Developers continue to offer an interest absorption scheme (IAS) which is similar to the deferred payment scheme (DPS). Under the IAS, buyers sign up for a loan with a bank but won’t have to fork out any cash other than the 20 per cent downpayment until the project gets its Temporary Occupation Permit (TOP). Although buyers may find it attractive not to have to make any progressive payment or service a loan before TOP, they should be aware that they may have to pay a premium of around 3 per cent under the IAS.

In addition, they would usually be locked into the loan for two years under the scheme. So complications could arise should they need to sell their property within the lock-in period.
Meanwhile, those shopping around for a property now should keep this checklist in mind:

• Purpose (whether it is for own stay or investment)
• Holding period
• Budget
• Preferred location
• Surrounding environment
• Proximity to workplace, school and amenities
• Accessibility to expressways and public transport nodes
• Rental yield/resale value (especially for investment)
• Reputation of the developer
• Design of building and unit layout.

While one naturally prefers to buy at the bottom of the cycle, this is harder to do with property than with stocks as each unit and project is different. The unit you want may not be up for sale when prices are at their lowest.

And there are a range of personal decisions that cannot be perfectly timed with the market cycle. For instance, newly married couples setting up home, parents moving closer to their children’s schools, foreigners buying for their children who are studying in Singapore, etc. In addition, a home buyer with a longer holding period is more prepared to ride out the down cycle.

A home buyer should work out his budget to ascertain if he can afford to service the mortgage even in the worst-case scenario. A general guide is that the monthly mortgage payment should not be more than 40 per cent of monthly household income. But in these uncertain times, it would be more prudent to consider a lower monthly mortgage service ratio. The key at this point is to buy within one’s means.

Chua Chor Hoon is senior research director, DTZ; Lim Hui Ling is senior research analyst, DTZ

Source: Business Times, 26 Mar 2009

SINGAPORE: The Nautilus@Punggol is the Housing and Development Board’s (HDB) latest Build-To-Order (BTO) project and the first in that area.

Prices for its 4- and 5-room units are about 20 to 30 per cent lower than the resale flats in that vicinity, signalling generous subsidies for these new flats.

The Nautilus@Punggol will have eight blocks comprising some 520 flats. Of these, nearly 80 per cent are 4-room flats and the rest are 5-room apartments. HDB said the prices of the new flats are affordable for first-time buyers.

Giving a comparison of resale flats about seven years old in Punggol, HDB said 4-room resale flats are currently going at between S$306,000 and S$350,000, while 4-room flats at The Nautilus will be sold at between S$228,000 and S$274,000.

Likewise, The Nautilus’ 5-room flats are priced in the range of S$305,000 to S$357,000 against the resale price range of S$368,000 to S$428,888 for units in the Punggol area.

At such prices, analysts expect strong demand for the project.

Adam Tan, marketing manager, Propnex, said: “It will probably be about three times or more oversubscribed because they are releasing a rather small number of units for this project. Punggol is an up-and-coming estate. It’s no longer a backwater estate – it’s coming into its own.”

HDB added that besides enjoying a generous market subsidy, eligible first-time buyers whose average monthly household income is S$5,000 or less can also qualify for an additional CPF Housing Grant of up to S$40,000. This grant can be used to offset the initial downpayment.

HDB also said that based on the income of flat applicants in the fourth quarter of last year, an applicant for The Nautilus@Punggol whose income is at the median level will not need to fork out cash to meet their monthly housing commitments, which would be fully covered by their monthly CPF contributions.

The Nautilus@Punggol is part of HDB’s programme to remake the heartlands. For the whole of this year, HDB is planning about six BTO projects in Punggol, building some 3,000 new flats in that area.

Applications for The Nautilus@Punggol flats close on April 8.

Source: Channel News Asia, 26 Mar 2009

SINGAPORE: Champions Court – this year’s first Build-to-Order (BTO) project in Woodlands – has been oversubscribed. Almost 3,200 applications have been received for the 815 units on offer.

The project comprises studio apartments, three, four and five-room flats, and applications for all types have been oversubscribed.

For example, there are only 224 studio apartments on offer, but 618 applicants are vying for them. An applicant, Margaret Tan, said: “Because all my children are already married, so I want to find a smaller (apartment) that is enough for me.”

The four-room and five-room flats seem to be the most popular. The 224 four-room units have seen 1,225 applications, while the 185 five-room units have so far received 935 applications.

The final number of applications for the BTO project will be confirmed at 2pm on Thursday. The project is near Woodlands Regional Centre – where amenities are aplenty – and the MRT line.

Another applicant, Liza Mohamed Gasaly, said: “Basically the flats are near our parents’ home in the north. Convenience is there – (the flats are) quite near the MRT and there are schools and shops (nearby).”

Analysts are not surprised by the overwhelming response. Director, Dennis Wee Group, Chris Koh, said: “You can see that it’s priced very competitively, it’s much lower than resale flat prices. In terms of location, you are near all the amenities, so I don’t see why if you are eligible to buy, why you wouldn’t want to try for it.”

Prices range from S$57,000 for the smallest studio apartments to S$296,000 for the five-room flats.

But Mr Koh added that the response is not indicative of future BTO projects. He said: “A lot of circumstances will decide whether a flat will be sought after, whether there’s a demand for it. One, we always say location, second will be pricing. If it’s priced competitively, people will be willing to book it. If it’s not, then they will say they may as well get a resale flat.”

The Housing and Development Board (HDB) said it will conduct a balloting exercise for all applicants, after which those who are successful will be invited to make a selection.

If the BTO has a good take-up rate, HDB will proceed to build the flats, which are expected to be ready by 2013.

Source: Channel News Asia, 11 Mar 2009