Cash-rich homebuyers driving up flat prices

Some popular public housing estates are recording the biggest premiums from eager homebuyers.

New data from the Housing Development Board (HDB) showed that flats in well-known towns like Marine Parade, Bukit Timah and Queenstown are commanding the largest cash top-ups.

The difference between the actual price paid and the bank's valuation is known as Cash-Over-Valuation (COV), and the average COV reached $24,000 in Q4 across the country and in all flat types.

In some central areas like Bukit Timah, the median COV for flats surged to $30,000 in Q4. Even in suburban areas such as Punggol, the median COV jumped 195 percent to $28,000, while in places like Pasir Ris, it climbed 186 percent to $20,000.

Many housing agents said that cash-rich buyers – both locals and PRs – are driving up the HDB resale flat prices and the COV levels.

PropNex Agent Wilson Low recently brokered a sale to a local couple who paid $730,000 for a five-room flat at Cantonment Close. This meant a skyrocketing $85,000 COV.

“The buyers flush with cash from a private property en bloc sale, paid the whole sum without a bank loan. We are seeing quite a few such cash-rich buyers who are meeting the high demands of sellers,” he said.

Mr. Low said that PRs from Malaysia, Indonesia and China are more likely to choose central locations and are more serious buyers compared with locals, given their urgent need for a flat.

Eugene Lim, associate director of ERA Asia, also said that the resale market “will continue to be driven by families who have immediate housing needs, namely the second-time buyers and PRs for the near future.”

HDB’s data showed that average resale flat prices in Queenstown hit $645,000 for five-room flats and $800,000 for executive flats, up from $619,000 and $712,000 in Q3, respectively.

Notable prices were also fetched in Marine Parade, where the median resale price for a five-room flat reached to $625,000, and Clementi, where an executive flat was priced at $690,000.

Monthly rents for all types of HDB flats also inched up in Q4 from Q3, except the three-room units at $1,500. Rents for four and five-rooms jumped 3 percent to $1,750 and $1,850, respectively, while rents for executive units rose 2 percent to $2,000 per month.

Yesterday, HDB said that subletting transactions also rose by 1 percent to 3,902 cases in Q4, compared with the Q3 transactions.

Also, the number of approved subletting for HDB flats increased to 24,300 in Q4, compared with 23,800 units in Q3.

Mr. Lim of ERA said that the COV is “likely to continue to inch upwards in 2010 as we enter economic recovery.”

“However, as we are not in very positive economic waters yet, COV increases are likely to moderate in the months to come.”