Analysts expect 1-8% drop for this year despite pick-up in activity
[SINGAPORE] Resale prices for Housing and Development Board (HDB) flats continued their decline in the last quarter of 2013, a trend which property consultants say is unlikely to reverse even by the end of this year.
They attribute this to a convergence of measures imposed to cool the market and a continued supply of new flats.
Flash figures released by the HDB yesterday indicated that the resale price index in the fourth quarter of 2013 was 202.1 (with 1998 being the base year when the index was 100).
This was a fall of 1.3 per cent from the third quarter's figure, and the second consecutive quarter of shrinking prices; the index dipped 0.9 per cent in Q3 2013, making that the first contraction since 2009.
For the year, resale prices are estimated to have contracted by 0.4 per cent.
That the decline in prices was marginal shows that there was an "on-going genuine demand" for resale flats at realistic price points and significantly reduced cash-over-valuation (COV), said Ong Kah Seng, the director at R'ST Research.
The median COV premium plunged from $35,000 last January to $8,000 in November, said the Singapore Real Estate Exchange (SRX).
Consultants are expecting last year's transaction volume to come in at below 20,000 units - the lowest since the turn of the decade, said PropNex Realty chief executive officer Mohamed Ismail. In the last five years, annual volumes have hovered between 24,000 and 37,000.
For this year, analysts generally agree that prices will continue to soften, though they expect activity to pick up later in the year. The expectation is for prices to fall by between one and 8 per cent for the year as a whole.
Mr Mohamed Ismail said: "I foresee this being a quiet year for the HDB resale market - similar to last year, which had seen the fewest deals in years."
At some point, however, sellers will eventually resist cutting prices further. On their part, buyers will get tempted away from the Build-to-Order (BTO) market as prices and COV continue to moderate, property consultants said.
The 18 per cent cut in supply of new three-room and larger flats this year to 18,600 units could send buyers into the resale flat market.
ERA Realty's Mr Lim said that he expects resale volume to rise 8 to 10 per cent over 2013's level, despite the overall expected decline in prices.
But Nicholas Mak, the head of research and consultancy at SLP International, noted that the overall supply of BTO flats targeted for this year is 24,300 flats - just 3 per cent lower than last year's 25,100 units.
"This will continue to weaken the HDB resale market as buying demand is drawn from the HDB resale market to the HDB primary market," he said.
Mr Ong cautioned that sellers cannot raise prices excessively even with improved demand, since the mortgage-servicing ratio cap essentially restricts buyers from borrowing more to finance their home.
Major policy changes from the government are unlikely, analysts said.
"As prices are declining gradually but consistently, the government is unlikely to introduce further measures, as it is not their intention to have government policies cause any significant price declines over a short period," said Mr Lim.
Mr Ong from R'ST said that it will not be necessary to loosen measures, since the government's intent was to encourage prudent buying; many owners putting their flats up for sale have seen prices appreciate over time, especially in the past few years.
"It doesn't really cause sellers to be in negative equity upon resale . . . even when prices fall in 2014," he said.
The resale price index for the full quarter and more detailed public housing data will be made available on Jan 24.
Source from Business Times