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The HDB Resale Price Index (RPI) has set a record high with a 4.1 percent increase to 161.3. This was mainly due to the 20-percent increase in the median Cash-Over-Valuation (COV) levels, from $25,000 in Q1 to $30,000 in Q2.
The euro debt crisis that affected Greece in Q1 this year and its subsequent impact on the world have increased the demand for public housing, as indicated by the higher COV prices.
“This economic uncertainty and the rising prices of private property, have led to the steadily declining number of private residential units sold in the last two months of 2Q10 coupled with a resulting demand for public housing,” explained Mr. Mohamed Ismail, chief executive of PropNex.
Citing other reasons for the higher COV prices, Mr. Ismail said, "Previous owners of HDB flats who sold their flats with a high COV can now afford to pay high COV for their new flats.”
“Furthermore, it is currently the market practice for sellers to ask for high COV as they know that they are expected to pay a high COV when they purchase their next HDB flat. Either that or they are looking for more cash to put down the deposit on their new private property purchase,” he added.
COV, which is an indication of supply and demand, can fall into negative levels, just like what happened in 2003-2004 during the SARS period, said Mr. Ismail. In spite of the current trends, COV prices will not surpass an overall threshold of approximately $40,000, he added.
The number of transactions in the resale market in Q2 only had a marginal increase of 7.4 percent to 9,114 transactions from 8,484 transactions in Q1, the lowest quarter-on-quarter increase seen over the previous years.
“This low number is partly due to the fact that 1Q10 saw an unusually high number of resale transactions for a year’s first quarter,” said Mr. Ismail.
He also attributed the low number of resale transactions to the HDB policies announced in March. These include the reduced quantum of the second concessionary loan, the withholding of $10,000 of housing subsidies for Singapore Citizen-Singapore Permanent residents, and the revised Minimum Occupation Period (MOP) of three years for residents who did not use any housing subsidy, irrespective of whether they had a loan or not.
“The announcement of all these new policies combined would have caused a general sense of cautiousness amongst the HDB-dwelling population, as some of the consumers would have to re-look at their finances or MOP before selling their flat,” he said.
He also praised the government’s effort to launch more public housing, with 8,828 new Build-to-Order (BTO) units released to date, as well as the launch of DBSS and Executive Condominium sites, which can yield about 4,725 units. However, these would only have a minimal effect on the resale market given the constant demand for immediately available public housing.
With the recent figures, Mr. Ismail revised his RPI forecast to grow by around 12 percent this year.
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Reader Comments: (2 comments)
if we dont have enough money to pay cov to buy flat to who we have to refer to
Its seems that there is no help in slowing down resale HDB prices - right??