HDB resale prices up 1.2%

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PRICES of HDB flats have staged a surprising comeback, reversing a
first-quarter dip of 0.8 per cent to rise 1.2 per cent in the second quarter
and reach a historical high.

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.

More detailed public and private housing data for the second quarter is set
to be released at the end of this month.

See also
Money

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