Prices of HDB resale flats surged

Regardless of the recession, the HDB market resale appears to be sounding very nicely. In the second quarter, high demands for resale flats made prices to gain a record high and industry watchers predict extra advantage for the year.

Yesterday, the Housing and Development Board revealed the increase of 1.4 percent from the previous quarter in terms of resale price index to 140.2 percent in the second quarter. This is the highest level ever gained since 1990.

This increase exceeded HDB’s estimate of 1.2 percent. It also had a decrease of 0.8 percent in Q1 – the first fall after nine consecutive quarters of growth. The price decline in the first quarter seems to be a statistical breakdown, according to property consultant Nicholas Mak. Executive flats observed the largest percentage increase in terms of median resale prices, up by 2.2 percent from the previous quarter to $455,000.

Resale interest had been strong, which sustained the market. Sellers and buyers filed 10,184 resale applications in Q2 – expanding 58 percent from the first quarter and 31 percent from the previous year. HDB said the volume of the last quarterly resale registration of 11,562 in Q4 of 2004 crossed the 10,000 mark four years ago.

Nearly all of the 10,184 applications in Q2 were for flats with four rooms, followed by flats with three rooms and then flats with five rooms.

However, executive flat applications showed the largest rise, doubling from the previous quarter to 753 in Q2. Those for flats with five rooms also increased 80 percent to 2,713. A sharp surge in terms of resale activity requiring larger flats suggested that there were some owners who put their flats up for sale to purchase private residences, according Mr Mak.

HDB upgraders were flagged by market analysts as an important buyer group that managed to revive the private property market. Many preferred to buy units in Double Bay and Mi Casa Residences, which are mass-market projects.

Albert Lu, managing director of C&H Realty, pointed out that smaller flat owners move to larger flats. In the last quarters, executive flats and five-room prices have languished, which made the move more beautiful.

Despite the upgrading activity, the influx of permanent residents or PRs also added to the need for resale flats. Dennis Yong, chief of HSR Property Group, saw that the firm has an increase of 10 percent in its transactions on resale, which involved permanent residents in the previous months, and a lot of them came from India and China.

Buyers remained reluctant in paying high premiums for these HDB flats. The median cash-over-valuation (COV) in Q2 was $3,000 for the entire flat types, somewhat down from $4,000 in Q1. Notably, most executive and five-room flats remained ineffective to require any COV.

In one way, low COV maintained demand for resale flats of HDB, said PropNex CEO Mohamed Ismail. He added, “As the demand is strengthening quickly, sellers are expected to demand a higher COV”. He expects a gain in the resale price index around 3 percent to 145 points before the year ends. Mr. Lu projects a 2 percent to 3 percent increase in terms of resale prices.

Several months ago, property consultants feared that the resale prices of HDB would decrease as much as 10 percent for the entire year. Several signs of a better sentiment and steadying economy in the property market appear to have soothed worries.