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Sharpest drop in HDB resale prices since 2005

SINGAPORE — Prices of Housing and Development Board (HDB) resale flats fell by 1.7 per cent in the third quarter of the year, the steepest decline since 2005, with analysts attributing it to the loan curbs and the strong supply of new flats.

HDB housing at Toa Payoh estate on 10 April 2014. Photo. Ernest Chua.

HDB housing at Toa Payoh estate on 10 April 2014. Photo. Ernest Chua.

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SINGAPORE — Prices of Housing and Development Board (HDB) resale flats fell by 1.7 per cent in the third quarter of the year, the steepest decline since 2005, with analysts attributing it to the loan curbs and the strong supply of new flats.

Data released by the HDB yesterday showed the index falling from 195.7 in the second quarter to 192.4 in the third quarter of this year, the fifth consecutive quarterly decline. It is the sharpest drop since 2005, when the index fell 4.8 per cent due to anti-cashback measures aimed at stopping buyers and sellers from inflating prices to facilitate bigger loans.

The fall in resale prices has also brought buyers back to the market, increasing resale transactions by 2.8 per cent to 4,513 cases in the third quarter.

Analysts TODAY spoke to attributed falling resale prices to loan curbs such as the reduced Mortgage Servicing Ratio cap and the strong supply of new flats. Changes to the resale process since March, such as allowing the buyer to obtain the valuation report only after the deal is sealed and the Option to Purchase granted, have also resulted in more cautious buyers, said PropNex Realty.

ERA key executive officer Eugene Lim noted that resale prices have fallen by an average of 1.4 per cent per quarter since it peaked in the second quarter of last year.

“The moderate price declines show the resilience of the market due to stable economic and employment fundamentals. Also, the measures implemented by the Government are designed to stabilise prices and not cause any huge sudden drop,” he said.

Analysts agreed HDB resale prices would continue to fall, but differed slightly on how much.

PropNex Realty chief executive officer Mohamed Ismail expects prices to soften 6 to 7 per cent for this full year, while SLP International executive director for research and consultancy Nicholas Mak predicted 5 to 6.5 per cent.

Mr Ismail does not expect a turnaround in resale prices this year, given a “looming flood” of new homes and the continued impact of property measures. Resale prices could fall 5 to 6 per cent more next year, mainly due to more second timers collecting their keys to their Build-to-Order (BTO) flats, he said.

Mr Mak said the decline in resale prices could slow down in the later part of next year given the expected reduction in the BTO flat supply. “However, as the Government had not indicated any plans to reduce the cooling measures, prices would still face downward pressure in the next six to 12 months or until some property curbs are relaxed,” said Mr Mak.

On the higher resale volume, homebuyers could be drawn to the resale market by more near-zero Cash Over Valuation (COV) price levels and lower resale prices, said Mr Mak. Some demand could also have moved over to the BTO market in view of the generous grants and increased supply of flats in recent years, said Mr Wong Xian Yang, manager of research and consultancy at OrangeTee.

Nonetheless, analysts predicted that resale volume could hit a record low this year, despite improvement in the third quarter. This quarter is still fairly weak compared with the boom period from 2009 to the middle of last year, said Mr Mak, estimating that 16,000 to 17,000 resale flats could change hands this year.

The last quarter is unlikely to reach the 5,417 transactions needed to equal last year’s volume of 18,100 units, said Mr Lim, who forecasts an all-time low resale volume of below 17,500 units.

However, Mr Lim said resale volume may rebound next year as the Government scales down BTO supply.

“As resale prices continue to stabilise, we may see the return of more first-time buyers to the resale market; particularly those who are unable or unwilling to wait the three years or so for the completion of the BTO flats,” he said.

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