Singapore Property News & Prices

PRICES of HDB resale flats fell in the first quarter of this year – the first decline since 2006 and a sign that the two-year run of record-breaking gains has ended.

Flash estimates yesterday showed that prices dropped by 0.6 per cent for the first three months, compared with the fourth quarter of last year.

Prices in the fourth quarter had increased by 1.4 per cent over the previous period and helped drive resale flat prices up by a hefty 31.2 per cent over the past two years.

The latest numbers caught industry experts by surprise and underline how the worsening recession has hit the Housing Board (HDB) market sooner than expected.

Many analysts had predicted further increases in resale prices with a decline becoming apparent only later in the year.

Agency chiefs from both PropNex and ERA Asia Pacific had recently forecast that HDB resale prices could rise by a further 3 per cent to 5 per cent this year.

But yesterday’s numbers have altered expectations overnight, with analysts now predicting a decline of anything from 2 per cent to 10 per cent this year.

Tell-tale signs in the market signalled that prices have started heading southwards, in tandem with private property prices, which plunged 13.8 per cent for the first quarter of this year, said Prop- Nex chief executive Mohamed Ismail.

‘The gloomy outlook for the past few months, coupled with more retrenchments, have hit home, and even the HDB market is feeling it,’ said Mr Ismail.

PropNex and ERA have reported buyer resistance to flats above $500,000, with five-room and executive flats feeling the brunt of the price slide.

Such flats are now being sold at below valuation, in some cases up to $40,000 under, said ERA associate director Eugene Lim.

However, there is still strong demand for three- and four-room flats as buyers and permanent residents go for the safer option, he said.

ERA transactions showed that four-room units made up 41 per cent of its sales in the first quarter, compared with 38 per cent in the fourth quarter last year.

Despite the slight dip in prices, HDB flats are generally ’still holding’ due to relatively strong demand, say experts.

Valuations of bigger flats are also likely to be lower in the face of decreasing transaction prices.

‘This will have the multiplier effect of bringing down prices for these flat types,’ said Mr Lim.

HDB’s latest numbers did not surprise Knight Frank’s director of research and consultancy, Mr Nicholas Mak, who had predicted bearish numbers from last year.

‘HDB prices cannot go against the broad economic trend, when almost all asset prices are depreciating,’ he said.

Chesterton Suntec International’s head of research, Mr Colin Tan, said it is logical that HDB resale prices have ‘turned a corner’, partly because the supply of attractively priced new flats has increased.

As demand for HDB resale flats has relatively eased, so have their prices, and they will fall gradually from here, although not drastically, he added.

ERA and Knight Frank are estimating a decline of 5 per cent to 10 per cent over the year, while PropNex has put it at 2 per cent.

Demand for resale flats will continue to come from permanent residents, people downgrading from private properties to HDB flats and those downgrading from larger to smaller homes, said ERA’s Mr Lim.

He expects total resale transactions for this year to be around 30,000 units, compared with last year’s 28,419 units, with three- and four-room units making up the bulk of sales.

Demand for smaller flat types looks set to remain high amid the recession.

HDB’s quarterly sale of 150 two- and three-room flats spread across Punggol, Queenstown, Sengkang and Yishun attracted 427 applications yesterday by the close of its first day.

Source : Straits Times – 2 Apr 2009

Private home prices plunged 13.8 per cent in the first three months of this year – a record quarterly drop as developers and other market players slashed their expectations.

It was the third quarterly fall in prices – and much steeper than the 6.1 per cent drop in the preceding Q4 2008, according to advance estimates released by the Urban Redevelopment Authority (URA) yesterday. Private home prices dipped 1.8 per cent in Q3 2008 after 17 straight quarters of growth.

Prices of resale HDB flats, which seemed to defy gravity and grew throughout 2008, also fell in Q1 2009 – by 0.6 per cent – after nine quarters of growth.

Analysts were expecting a significant drop in private home prices, but the actual fall was bigger than thought. In recent months, developers have cut the selling prices of new homes and sellers of secondary properties have also trimmed their asking prices.

‘The fall is not surprising as a lot of developers have reduced prices to move new units, and in the resale market, people are now asking for more reasonable prices,’ said DTZ’s senior director Chua Chor Hoon.

DMG & Partners Securities’ analyst Brandon Lee said that new projects and units in previously launched but unsold projects, were being launched or relaunched at 10-30 per cent discounts to the original intended selling prices. Also, there were distressed sales in the secondary market.

Aggressive price cutting by developers seems to have paid off. An estimated 2,100-plus new homes were sold in Q1 – the highest level since the market was hit by the US mortgage crisis in the last quarter of 2007 and more than four times the number of new units sold in Q4 2008. But the pick-up in sales volume was at the expense of prices.

URA’s non-landed private home price index for the Core Central Region, which includes the prime districts, financial district and Sentosa Cove, fell 15.2 per cent quarter-on-quarter in Q1. In the Rest of Central Region, prices fell 17.2 per cent. And in the Outside Central Region, which is a proxy for suburban mass-market locations, they fell 7.5 per cent.

The drop in HDB resale prices took some observers by surprise, as analysts tracking the sector had said that they would continue to rise in the first half of this year, though at a slower pace than in 2008.

‘HDB resale prices increased some 32 per cent since Q1 2007 before reaching a new peak in Q4 2008,’ said ERA Asia-Pacific associate director Eugene Lim. The marginal decrease in Q1 shows HDB resale prices are now moving in tandem with the deteriorating economic and unemployment conditions.

Analysts said that the main cause of the fall in HDB’s resale index is the lower cash-over-valuation (COV) amounts that buyers are now willing to pay. ‘The slight dip is probably due to more buyers of HDB flats being resistant to paying high levels of COV,’ said PropNex chief executive Mohamed Ismail. ‘While demand for HDB resale flats is evidently still strong, sellers in this economic climate are realising the weaker buying power of consumers.’

Private home prices are expected to continue falling in the rest of the year. ‘While the fall in prices of private residential properties in the first quarter was acute, the drab economic situation is expected to continue to place downward pressure on home prices in 2009,’ said Nicholas Mak, director of research and consultancy at Knight Frank.

But the pace of decline is expected to taper off. ‘Developers have already made a quantum leap in reducing prices in Q1 2009 and although further declines in launch prices can be expected, the incremental drop is likely to be marginal and more gradual,’ said Tay Huey Ying, director for research and advisory at Colliers International. Ms Tay expects the rate of decline in the URA price index to taper off to about 8 per cent in Q2 2009 and then 3-5 per cent for each of the subsequent two quarters.

For the full year, analysts put the overall drop in private home prices at 20-30 per cent, with homes in the suburban areas taking the smallest hit.

The fall in HDB prices, on the other hand, is expected to pick up steam in the rest of 2009. Analysts expect that HDB resale prices will fall by between 5 and 15 per cent for the whole of 2009.

Source : Business Times – 2 Apr 2009