COVs fall to 2.5-year low

SINGAPORE — Cash-over-valuation (COV) premiums for Housing and Development Board (HDB) resale flats fell to the lowest in more than two-and-a-half years last month, as the Government’s cooling measures and ramped-up supply of new homes took a toll on the resale market.

The median overall COV dipped to S$20,000 last month, down S$4,000 or 16.7 per cent from the previous month, according to the Residential Property Flash Report released yesterday by the Singapore Real Estate Exchange (SRX). This is the lowest monthly figure since January 2011.

The downtrend for overall prices of previously owned HDB flats also persisted for a third consecutive month, slipping by a marginal 0.5 per cent to a median S$450,000 for the whole of Singapore, according to the SRX, which compiles data from 11 property agencies accounting for the majority of resale transactions here.

Analysts attributed the declines to the latest property curbs introduced in January to contain prices and curb speculation. The Government has imposed seven rounds of measures since 2009, the latest of which include higher additional buyer stamp duty (ABSD) and capping mortgage payments to 30 to 35 per cent of a borrower’s gross monthly income.

“This (set of measures) is the most effective and also the most severe … (The fall in COV and resale prices) is a continuation of a trend that we’ve seen in the past couple of months,” said Mr Nicholas Mak, Executive Director of Research and Consultancy at SLP International Property Consultants.

According to the SRX’s flash estimates, 1,270 resale HDB units were sold last month, down 36 per cent from the same period last year and up a mere four units from June.

The sentiment in the non-landed private residential resale market was subdued, with transaction volume expected to remain relatively flat at 670 units last month, slightly higher than June’s 640 units.

According to the SRX, prices of resale condominiums increased at a slower pace, inching up a marginal 0.1 per cent last month compared with an increase of 0.8 per cent in June.

Prices in the rest of central region, or the city fringes, rose 1.2 per cent, while those in core central region and outside central region fell 0.5 and 0.4 per cent, respectively.

New private housing launches are luring buyers away from the resale market, said Key Executive Officer of ERA Realty Eugene Lim.

Apart from boasting attractive locations and attributes, new homes also make for better investments as they offer greater capital appreciation, he added. About 16,742 private homes are projected to receive Temporary Occupation Permits (TOP) this year.

“Demand is anticipated to slow down, taking onto account that pent-up demand is gradually being met,” Mr Lim said. “Sales volume is therefore expected to decline moderately the following quarters.”

Another factor impacting private property demand is the introduction of the total debt servicing ratio (TDSR) framework by the Monetary Authority of Singapore at the end of June, Mr Lim said.

Under the framework, banks must ensure any housing loan does not push a borrower’s total debt obligations above 60 per cent of his or her gross monthly income. It also states that borrowers named on a housing loan should be the mortgagors of the residence for which the loan is taken. Guarantors of a housing loan who do not meet the TDSR threshold will be brought in as co-borrowers and be subjected to the same requirements.

“This will discourage investors who try to avoid paying the additional buyer’s stamp duty and obtain a higher loan-to-value ratio by using their children’s names to purchase a second property,” said Mr Lim.