THE HDB resale market seems to be chugging along nicely despite the recession. Soaring demand for resale flats sent prices to a record high in the second quarter, and some industry watchers are predicting further upside for the year.

Data from the Housing and Development Board yesterday showed the resale price index rising 1.4 per cent from the previous quarter to 140.2 in Q2. This is the highest level seen since 1990.

The increase surpassed HDB’s flash estimate of a 1.2 per cent rise. It also reversed a 0.8 per cent fall in Q1 – the first slide after nine straight quarters of growth. The price dip in Q1 now seems like a ‘statistical blip’, said property consultant Nicholas Mak.

Executive flats saw the biggest percentage rise in median resale prices, up 2.2 per cent from a quarter ago to $455,000.

Strong interest in resale flats helped sustain the market. Buyers and sellers filed 10,184 resale applications in Q2 – swelling 58 per cent from Q1 and 31 per cent from a year ago. According to HDB, the quarterly resale registration volume last crossed the 10,000-mark more than four years ago – it was 11,562 in Q4, 2004.

Most of the 10,184 applications in Q2 were for four-room flats, followed by three-roomers and then five-roomers.

However, applications for executive flats showed the greatest increase, doubling from a quarter ago to 753 in Q2. Those for five-room flats also jumped 80 per cent to 2,713. The sharp surge in resale activity involving larger flats suggests that there were more owners who sold their flats to buy private homes, said Mr Mak.

Market analysts have flagged HDB upgraders as a significant group of buyers who revived the private property market. Many went for units in mass-market projects such as Mi Casa and Double Bay Residences.

C&H Realty managing director Albert Lu pointed out that owners of smaller flats are also moving to larger flats. Prices of five-room and executive flats have languished in the last few quarters, making the move more attractive, he said.

Upgrading activity aside, the inflow of permanent residents (PRs) also contributed to demand for resale flats. HSR Property Group chief operating officer Dennis Yong observed that his firm has up to 10 per cent more resale transactions involving PRs in the last few months, and many of them are from China and India.

Buyers remained unwilling to pay high premiums for HDB flats. The median cash-over-valuation (COV) was $3,000 across all flat types in Q2, down slightly from $4,000 in Q1. Notably, most five-room and executive flats were still unable to command any COV.

In a way, the low COV sustained demand for HDB resale flats, said PropNex CEO Mohamed Ismail. ‘As the demand is strengthening quickly, sellers are expected to demand a higher COV.’ Mr Ismail expects the resale price index to gain around 3 per cent to 145 points by the end of the year. C&H Realty’s Mr Lu also projects a 2-3 per cent increase in resale prices.

Just a few months ago, property consultants had feared that HDB resale prices would drop as much as 10 per cent for the whole year. Signs of a stabilising economy and improved sentiment in the property market seem to have soothed nerves.

Statistics from the Urban Redevelopment Authority yesterday also painted a more calming picture. While prices in the residential, commercial and industrial sectors still fell in Q2, the declines were smaller than a quarter ago.

THE resale prices of Housing Board flats have risen by 10 to 15 per cent in the past one to two years, despite the recession that began in September last year.

The HDB may have contributed to the spike when it decided to raise the valuation prices of its flats last year, saying it would help buyers as a lower cash-above-valuation payment would result.

The fact is, most buyers still ask for cash-above-valuation payment and the amount does not vary much from that before HDB increased the valuation tag.

When I helped a friend who wanted to buy a flat, the valuation of a four-room HDB flat in Tampines was about $300,000 in 2007 and early last year, with buyers asking for about $30,000 cash. The price was therefore $330,000.

I now hope to buy a resale HDB flat and the valuation of a similar flat is about $350,000 with a demand of about $20,000 cash above valuation.

While the cash request is slightly lower, the valuation price has leapt. The price of a four-room flat in Tampines is about $370,000 now, some $40,000 more than the price early last year – and this is largely due to the higher valuation price.

Instead of helping to stabilise prices, the HDB’s spike in valuation has been instrumental in increasing resale prices.

Source:  TODAYonline – Loh Chee Kong

More taking industry exams, but errant and unaccredited agents still a concern.

Flash estimates from the Housing and Development Board (HDB) released yesterday show the resale price index rising to 140 – a record level not seen since the current index started in 1990.

It beats the previous record set in the fourth quarter of last year when it hit just over 139.

Market analysts said they were caught off-guard by the turnaround, as many had been predicting 2 to 10 per cent declines in HDB resale flat prices for this year after a descent began in the first quarter – the first one since 2006.

Yesterday’s numbers have changed expectations, with analysts reversing their forecasts for HDB flat prices to hold or increase by up to 5 per cent this year.

Industry observers attribute the latest surprise figures to three factors.

First, talk of an economic recovery has gathered momentum, backed by the recent stock market rally and brisk private property sales. This has slowed the slide in private property prices islandwide.

Flash figures capturing sales prices in the first 10 weeks of the quarter, released by the Urban Redevelopment Authority yesterday, show prices falling 5.9 per cent in the second quarter, compared to a 14.1 per cent decline in the previous quarter.

The marked slowdown in the price decline is in line with rising transaction prices evident since the strong rebound in home sales since February, said Colliers International’s director for research and advisory, Ms Tay Huey Ying.

More bullish sentiment, coupled with the strength in HDB resale prices, has supported the private market, say analysts.

High HDB valuations is another key factor. HDB upgraders – buyers with HDB addresses buying private property – have been able to sell their units at high valuations and for tidy profits to fund private property purchases.

Banking executive Vic Cheow, 28, is one such HDB upgrader who recently sold a four-room HDB flat to buy a three-bed condominium unit in Jurong.

Due to the high valuations, buyers do not need to dig deep for upfront cash – otherwise known as cash-over-valuation – to purchase resale flats.

‘We found selling at a profit easier as a result of this,’ said Mrs Cheow.

ERA Asia-Pacific associate director Eugene Lim reports that the agency, which accounts for more than 40 per cent of the HDB resale market, saw transaction volumes surge 52 per cent in the second quarter compared to the first.

‘The feeling in the second quarter is the recession hasn’t been as bad as it seems,’ said Mr Lim. Many sellers have become more willing to negotiate and are realistic, especially those selling larger flats, he added.

The third factor, flagged by Chesterton Suntec International head of research Colin Tan, is that demand far outstrips supply. HDB launched 7,793 new flats last year and will launch another 3,700 in the first nine months of this year.

‘HDB may have ramped up the supply of new flats recently, but it’s not enough and it takes too long,’ said Mr Tan. ‘There is still a lot of pent-up demand from a needs-based group of people. And they have no choice but to pay high prices because they cannot wait.’

A Credit Suisse report released recently notes that total public and private housing supply for 2008 to 2012 is 16,000 on average per year – 42 per cent lower than the 10-year historical average.

‘This does not look excessive versus the annual average 24,000 household formations or marriages,’ said the report.

But, added Mr Tan, it seems ‘unnatural for prices to rise against the fundamentals of the economy’, which is still in recession.