HDB Resale Market Buoyant But Upgrader Effect Still Muted

Source : The Business Times, July 26, 2008

Resale price index very close to record high of Q41996; Q2 transactions up 22%

THE Housing and Development Board (HDB) has announced that its Resale Price Index rose by 4.5 per cent in Q2 2008 over the previous quarter and 8.4 per cent since Q4 2007.

The number of resale transactions also increased by 22 per cent quarter on quarter to hit 7,760 transactions.


















On a half-yearly basis, a total of 14,120 transactions have been recorded so far, almost half of the 29,450 transactions for the whole of 2007.

The HDB Resale Price Index is now hovering very close to the all-time peak in Q4 1996, boosted by high resale prices in estates like Queenstown and Bukit Merah where the median price for five-room flats is now around $600,000.

But while a buoyant resale market can translate into a stronger HDB upgrader base, it may still be too early for developers to count on upgraders to prop up the private residential market.

DTZ executive director and regional head for consulting and research, Ong Choon Fah, said that HDB upgraders are 'still price-sensitive'.

According to DTZ's analysis, HDB upgraders accounted for 28 per cent of all private homes bought in Q1 2008, up from 22 per cent in the preceding quarter.

However, in 1998, when private property prices bottomed out, HDB upgrader transactions peaked at 62 per cent of all private property transactions.

And when the property market tanked again in 2002, HDB upgraders went in to buy up to 59 per cent of all private property transacted.

While the numbers suggest that HDB upgraders still find private property too expensive, Mrs Ong also pointed that HDB does now offer a 'spectrum' of property types to cater to more specific needs and price brackets.

Mrs Ong was referring to HDB's new Design, Build and Sell Scheme flats which have been selling well.

Sources also say that the 578-unit Park Central at AMK has received around 1,000 applications since its launch on June 23.

HDB has also launched a total of 4,524 new flats under the Build-To-Order (BTO) system for H1 2008.

ERA Asia Pacific assistant vice-president Eugene Lim points out that HDB upgraders tend to be those who sell their five-room or executive flats, and according to his analysis, this number has not increased significantly.

Five-room flats made up 26 per cent of all HDB resale transactions in Q2 2008, up from 25 per cent in the previous quarter while executive flats made up 9 per cent, up from 7 per cent quarter on quarter.

Four-room flats made up 37 per cent of all resale transactions, and Mr Lim also notes that the median price for this segment saw the highest increase by $15,000 to $300,000.

Mr Lim believes that the upgrader effect on the private property market could be curtailed by affordability too.

'Most upgraders will be looking for properties in the $650-$750 psf bracket,' he said.

Interestingly, the influx of new permanent residents (PRs) here has added to the demand for resale flats.

Mr Lim estimates that 20 per cent of buyers in the resale segment are PRs, up from 10-12 per cent a year ago.

However, whether PRs are partially responsible for the buoyant resale market is not known. HDB has not revealed the number of flats bought by PRs.

Perhaps a more interesting development is that the HDB Resale Price Index has begun to diverge from the private property price index, which grew by just 0.2 per cent in Q2 2008.

Still, most property consultants believe the chances of the two indices decoupling, to represent a disconnected private and public property markets, are remote.

Knight Frank director (research and consultancy) Nicholas Mak also highlights that between Q2 2002 and Q1 2004, prices of private homes fell, while HDB resale prices increased.

During this period, both indices did, however, remain relatively flat.

Mr Mak does believes that any divergence in price trends, if any, will only last for a few quarters before a correlation is re-established.

He added: 'Both private and public sectors do relate to the same macro-economic factors.'

DTZ's Mrs Ong also said that both sectors are linked by the 'substitutional effect'.

'If prices are too high in the private housing market, buyers will shift to the public housing market,' she added.

She also noted that significant shifts in price movements only tend to follow changes in housing policy and related spheres like Central Provident Fund.

Savills Singapore director (marketing and business development) Ku Swee Yong believes that HDB upgraders will eventually return to 'lend strong support' to the private property market, citing the interest, if not the take-up, in new mass-market launches like Livia and Clover by the Park as examples.