Some industry watchers are predicting further upside for the year
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.
APPRECIATING BLOCKS - Upgrading activity aside, the inflow of permanent residents, many from China and India, also contributed to demand for resale flatsData 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.
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