HDB Resale Flats Going For $17,000 Above Valuation

Source : The Straits Times, Oct 26, 2007

The driving force behind soaring HDB resale prices rides on the back of the strong rebound in the private home market.

IF YOU are looking to buy a HDB resale flat, make sure you have plenty of cash on hand.

Due to pent-up demand, an average five-room HDB resale flat now costs $17,000 above its valuation, from $7,000 just three months ago.

This cash-over-valuation amount has to be paid in cash by a buyer under the current rules.

In popular areas like Queenstown, five-room flats are going for some $110,000 above valuation, according to data released by the Housing Board on Friday.

In addition, more flats are being sold at higher prices.

Between April and June, only three out of every 10 resale flats were sold above valuation. But since July, it was eight out of 10 flats, the HDB said.

However, the higher prices are starting to deter buyers. The number of resale flats sold in the third quarter fell 11 per cent to 8,700, after rising 38 per cent in the previous three months.

The driving force behind the soaring HDB resale prices rides on the back of the strong rebound in the private home market that has filtered down to the public housing segment.

As prices of private homes climb, home buyers are being pushed out to cheaper properties such as HDB resale flats.

Taking advantage of growing demand, flat sellers are now asking for prices that are significantly higher than valuations.

But this is creating unhappiness among buyers, said property agents.

'With these kinds of asking prices, we are beginning to see some resistance in the market,' said Mr Eugene Lim, assistant vice-president at property agency ERA Singapore.

'The typical HDB home buyer does not have or does not want to fork out too much cash. It just doesn't make sense.'

ERA's data show that in the third quarter, there were fewer resales of all types of flats, from one-room units to executive condominiums.

But another property agency, PropNex, suggested that the drop in flat sales is 'only slightly significant'.

Over the last 10 years, the number of resale flats sold was 6,500 to 8,000 for most quarters.

Even with the fall in transactions in the third quarter, 7,700 resale flats were sold, noted PropNex's CEO Mohamed Ismail.

According to the HDB figures, buyers of executive condominiums in Clementi are forking out the highest median cash-over-valuation amounts.

The median amount - the point at which half the homes sold for more cash and half for less - hit $155,000.

In the other towns, the median cash-over-valuation amounts for executive condos ranged from zero in Jurong West to $137,000 in Bukit Timah.

For five-room flats, buyers paid between $5,000 above valuation in Woodlands and $91,500 in the Central area.

But the HDB cautioned that in some of these cases, there were fewer than 10 transactions of the specific flat type in that area.

This means the figures may not be representative.