HDB resale prices fall 1.3% in Q4

SINGAPORE — Prices of resale flats saw their sharpest fall since 2005 in the last three months, as cooling measures and the supply of new flats continued to dampen demand.

In the latest flash estimates released by the Housing and Development Board (HDB) yesterday, the Resale Price Index (RPI) fell 1.3 per cent to 202.1 for the final quarter of last year. Previously, it had fallen 0.9 per cent from a record high of 206.6 in the second quarter of last year.

The 1.3 per cent fall was the RPI’s sharpest decline since the second quarter of 2005, when the index fell 4.8 per cent to 101.6 due to anti-cash-back measures aimed at stopping buyers and sellers from inflating prices to facilitate higher loans.

Property analysts attributed recent falling resale prices to various government measures to cool the public housing market. ERA Key Executive Officer Eugene Lim cited the Mortgage Servicing Ratio cap of 30 per cent and the maximum loan term of 25 years for HDB mortgage loans as reasons for reduced resale demand.

He also credited the falling prices to the increased Build-To-Order (BTO) flat supply. Over 77,000 BTO flats were launched between 2011 and 2013, more than twice the number in the three years before.

“The large number of BTO flats and flats sold by HDB via the Sale of Balance Flats programme has offered a good number and variety of choices for first- and second-time buyers,” said Mr Lim.

Other factors include the three-year wait for new Permanent Residents before they can buy resale HDB flats, and allowing singles to buy two-room BTO flats in non-mature estates.

Analysts expect resale prices to continue to fall this year. Mr Nicholas Mak, Executive Director for Research and Consultancy at SLP International Property Consultants, predicts a 1 to 6 per cent decline in the index this year.

He argued that even with the reduction in supply of bigger units — three-room flats and larger — by 18 per cent in 2014, the overall supply of flats this year is only 3 per cent lower than last year.

“This will continue to weaken the HDB resale market as buying demand is drawn from the HDB resale market to the HDB primary market,” said Mr Mak.

Mr Lim expects overall prices to fall by 5 to 8 per cent for the whole year, a view shared by Mr Mohamed Ismail, PropNex Realty’s Chief Executive Officer.

Both analysts said buyers might return to the resale market as cash-over-valuation premiums moderate.

“While activity will be slow in the first half of 2014, I expect the market to pick up in the second half as lower prices and cash premiums may entice buyers back to the HDB resale market,” said Mr Ismail.

Mr Lim predicts moderate quarterly price declines of “plus-minus 1 per cent” over the year and resale transaction volume to be 8 to 10 per cent better than 20,000.

Mr Ismail expects resale transactions to go below 20,000 —among the lowest levels since the turn of the decade. He said: “I foresee this to be a quiet year for the HDB resale market — similar to 2013, which had seen the fewest deals in years.”