HDB Resale Boom

Source : TODAY, Tuesday, October 2, 2007

HDB resale prices surge in Q3 as rates for private properties rise at slower rate

Resale prices of Housing and Development Board (HDB) flats have risen to levels not seen since 1996, benefiting from a spillover of the bullish sentiment in the private home market.

In the third quarter of this year, HDB flats commanded an average 15-per-cent premium to their prices in the fourth quarter of 1998, which is used by the HDB as the base quarter for price comparison (base=100). Early estimates by the HDB showed the resale price index grew from 108 to 115 — a strong 6.5 per cent, in the three months ending September this year. This is more than double the 3-per-cent growth registered in the previous quarter.

"This means good news for the mass market — for people who have bought homes in the last six years, as they are now able to realise some profit," said Mr Mohamed Ismail, the chief executive of real estate agency PropNex.

Mr Ismail noted that the HDB resale price index had shown positive increases for three consecutive quarters. He estimated that with the current trend expected to continue into the final quarter of the year, the total number of resale units registered for the year could surpass last year's by about 4 per cent to hit 31,000.

Mr Eugene Lim, assistant vice-president at real estate agency ERA, said: "While the overall price increase was expected, the larger-than-usual jump in the HDB resale price index is probably caused by the filter-down effect from the private property market."

Earlier this year, several resale HDB flats were snapped up at record prices by cash-rich beneficiaries from the en bloc sales of private housing estates. Some prospective sellers of HDB flats in choice areas such as Bukit Merah, Queenstown, Tiong Bahru and Toa Payoh are now asking for premiums between $50,000 and $200,000 above valuation, ERA noted.

"With these kinds of asking prices, we are beginning to see some resistance in the market as the typical HDB home buyer does not have or does not want to fork out too much cash," said Mr Lim. "It just doesn't make sense."

Mr Nicholas Mak, director, Consultancy and Research Department at Knight Frank, believes that the growing demand for resale HDB flats will drive the lower end of the private property market.

"If the HDB resale home prices continue to grow by more than 3 per cent per quarter on average, it will give that extra push to the private mass-market segment in 2008, and we can expect very robust upgrader demand for private homes," said Mr Mak.

For private non-landed properties, prices continued to rise, but at a slower pace, in the third quarter — the first time since the current market upturn that started two years ago. The Urban Redevelopment Authority's (URA) preliminary estimates showed that private property prices rose 8 per cent compared to the second quarter, when they grew 8.3 per cent from the previous quarter — the fastest growth rate in eight years.

"Despite the stock market turbulence in August, the average private residential property prices in Singapore increased by 8.3 per cent," said Mr Mak. "The surge is even more obvious when compared with last year, where the average private residential property prices rose by less than 4 per cent per quarter."

"The demand drivers for the increase in the price of private homes could be attributed to several factors, including the increase in foreign talent to Singapore, optimism of the market, economic growth, and the increase in the price of the rental market," said Mr Mak.

Singapore created a record 64,400 new jobs in the second quarter of this year, and recorded a seasonally-adjusted unemployment rate of only 2.3 per cent.

About 43,000 new units of private housing are expected to be completed between the second half of this year and 2010, the URA said. Of these, about 19,900 units, or 46 per cent, have yet to be sold by developers.

Mr Mak predicts that "for the whole of 2007, private home prices could increase between 23 per cent and 32 per cent year-on-year, while HDB average resale flat prices could rise by 13 to 20 per cent".