COVs fall to lowest in 10 months

SINGAPORE — Property cooling measures, a robust supply of new flats and tweaks to housing policies have continued to take the heat off the Housing and Development Board (HDB) resale market, sending cash-over-valuation (COV) premiums last month to the lowest level in 10 months.

The Residential Property Flash Report released yesterday by the Singapore Real Estate Exchange (SRX) showed the median overall COV fell to S$26,000 last month, down S$4,000 or 13.3 per cent from April, and the lowest monthly figure since July last year.

The HDB resale price index also slipped by 0.1 per cent last month, with the median price for the whole of Singapore at S$457,000, according to the SRX, which compiles data from 11 property agencies that account for a vast majority of resale transactions here.

“This downtrend is a continuation of something that has started since the first quarter of this year,” said Mr Nicholas Mak, Executive Director for Research and Consultancy at property firm SLP International.

“Two reasons: One is the cooling measures introduced in January in which the mortgage servicing ratio for housing loans is capped, reducing people’s purchasing power. And the Government has also increased supply of Build-to-Order flats,” he said.

Mortgage payments to financial institutions are now capped at 30 per cent of a borrower’s gross monthly income, restricting the size of the housing loan.

In addition, housing policy changes have given greater priority to a wider group of people to own homes under the joint BTO and Sale of Balance Flats (SBF) exercise, drawing attention away from the resale market.

The latest exercise saw the HDB releasing 8,000 flats last month, with more units reserved for young couples expecting a child, second-time buyers who are downsizing, as well as divorcees and the elderly.

“As a result, the resale market is effectively only serving the ineligible second-timers and Permanent Residents now, resulting in the weakening of price and volume in May,” said Ms Christine Li, Head of Research and Consultancy at OrangeTee.

Sales of previously owned HDB flats fell 23.3 per cent from April to 1,114 units last month, according to flash figures by SRX. It said the volume for the whole month was estimated at 1,300, down around 10 per cent from the previous month and 35 per cent lower than the same period last year.

ERA Realty’s Key Executive Officer Eugene Lim said demand for resale HDB flats might continue to decline as more supply of new flats hit the market, giving buyers a better chance of securing their “perfect homes” through BTO launches.

“HDB targets to launch at least 25,000 BTO flats in 2013 … (and) with singles and second-timers finding it easier to apply for BTO flats in the subsequent BTO launches, there may be less demand in the resale market,” he said.

Meanwhile, the non-landed private residential resale market also continued its downward trend following the January cooling measures that included higher additional buyer stamp duties, lower loan-to-value-ratios and larger down payments.

Flash estimates showed only 666 units were transacted last month, down from April’s 671 units. However, the final figure is projected to be around 750, higher than the previous month but about 40 per cent lower than May last year.

Overall resale prices dipped 0.5 per cent last month, driven by declines in the Core Central Region (CCR) and the Rest of Central Region (RCR) of 0.5 and 0.4 per cent, respectively. However, prices in the Outside Central Region (OCR) rose 0.3 per cent.

The fall in overall resale prices in the non-landed private residential market is not surprising given the low transaction volume, noted Mr Alan Cheong, Savills’ Senior Director of Research and Consultancy.

“The lower volume means only people who are motivated, or have an urgent need, to sell their properties are in the market … Sellers who are not in a hurry can afford to hold out for prices to rebound,” he said.