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Latest Property Real Estate News - Published on 02/01/2014
HDB resale prices fell to the lowest in 2013
HDB resale prices declined by 1.3% in 4Q2013 according to the flash estimates released today—this is the largest fall for the entire 2013. Though the index only dipped to 0.4%, this sets the stage for HDB resale prices take the downward trend as Mr Mohamed Ismail, CEO of PropNex Realty, expects HDB resale prices to drop by between 5 to 8% in 2014.
“I foresee this to be a quiet year for the HDB resale market – similar to 2013 which had seen the fewest deals in years. While activity will be slow in the first half of 2014, I expect the market to pick up in the second half as lower prices and cash premiums may entice buyers back into the HDB resale market. As prices and COVs continue to moderate, more buyers may buy resale flats instead of BTOs due to the waiting time for completion. In the first nine months of 2013, there were 14,099 resale transactions. Overall, I expect the total number of HDB resale transactions for the year to be below 20,000, making this the historical lowest volume of transaction in the resale market since the turn of the decade. In the past five years, annual resale volumes range between 24,000 and 37,000,” commented Mr Ismail.
It comes as no surprise that 2014 is predicted to be a quiet year for the property market in light of the numerous property-buying restrictions. One such restriction is the tighter rules on PRs buying flats. Since August 2013, new PR households must wait 3 years before they can get a resale flat as opposed to no waiting time prior to the enforcement of the rule (PRs constitute a substantial number of HDB flat buyers. The drop in demand from PRs will reduce the overall demand for resale flats in 2014).
With the ramped-up supply of BTO flats in the past 3 years, a large proportion of first-time buyers have found it easier to get new flats. Hence, fewer first-timers will be looking at the resale market, causing this segment to languish in low activity.
Private property resale prices fell for the first time in 2013
Completing the picture of a weakened demand, private property prices also fell for the first time in 2013. A decline of 0.8% Q-o-Q to 214.5 was registered in the flash estimates released by URA today. Prices in both the CCR and OCR slipped 2.2% and 0.6% respectively, while RCR prices grew 0.8%.
For the entire 2013, homebuyers continued to be drawn to more affordable mass-market homes in the OCR, as prices grew by 6.8% while RCR prices also appreciated by a mild 0.3%. However, CCR properties bore the brunt of the several rounds of measures introduced in 2013 as prices slipped 2.1%. Overall, 2013 private property prices increased by 1.2%, significantly lesser than the 2.8% registered in 2012.
“Market sentiment turned cautious in 2013 especially after new rules were introduced such as the increased ABSD, refinement of rules relating to the application of the loan-to-value limits (LTV), and the adoption of a Total Debt Servicing Ratio (TDSR) framework for all property loans granted by financial institutions to individuals. All measures, especially the TDSR, have worked to trim down homebuyer’s affordability which was already shaved by earlier rounds of cooling measures. This drove many of them to look to the more affordably-priced suburban homes in the OCR and as a result, the mass-market segment dominated the private property transactions”, explained Mr Mohd Ismail.
Outlook for the private residential market optimistic in 2014
While reasonably-priced homes with desirable product and location attributes will continue to find favour with homebuyers, the private residential market looks to be heading towards a more muted growth trajectory, with weak demand due to various factors.
For one, although liquidity remains flushed in the market, the multiple rounds of government measures culminating in the implementation of the latest TDSR framework have effectively tightened credit and this should continue to rein in exuberant home buying.
Additionally, the potential homebuyer base is expected to shrink further with curtailed demand from upgraders from the HDB market. The purchasing power of these upgraders will be affected by the softening resale prices of HDB resale flats – due to a mix of abundant incoming supply, cooling measures and new public housing regulations which include a tighter Mortgage Servicing Ratio (MSR) on HDB housing loans. According to HDB’s flash estimate for 4Q 2013, the Resale Price Index declined by 1.3% Q-on-Q.
On the supply front, the plethora of choices available - from the record launch of new homes in the past two years to the sizeable residential supply that is expected to materialise in the next few years up to 2016 – will see homebuyers adopting a deliberate and selective approach towards home buying. Buyers’ fatigue to escalating prices has also set in and some developers may adopt a softer stance when pricing to entice homebuyers to commit.
“Moving forward, mass-market and mid-tier homes will continue to be favoured over the high-end/luxury segment, as such; the mass market segment will remain resilient—well-supported by genuine upgraders. For 2014, private property prices could experience a marginal correction of up to 2% for the whole year, largely contributed by the weaker CCR and RCR segments. On the flipside, OCR prices will remain resilient with positive growth of up to 3%”, concluded Mr Mohamed Ismail.
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