HDB resale prices edge up, strong rebound in volume

RESALE prices of Housing and Development Board (HDB) flats crawled slightly higher last month as price increases in smaller units offset the declines in larger ones, going by the latest data from the Singapore Real Estate Exchange (SRX).

But transaction volumes staged a strong rebound as buyers returned to the resale market after the Chinese New Year lull.

Flash estimates by SRX showed HDB prices edged up 0.3 per cent in March from a month ago. Prices for three- and four-room units rose by 0.5 per cent and 0.8 per cent, respectively as more buyers sought units with smaller quantums, given the loan cap under the Mortgage Servicing Ratio (MSR).

Prices of larger flats, however, softened by 0.2 per cent for five-room units and 0.7 per cent for executive flats from a month ago.

Overall HDB resale prices slipped 4.9 per cent year-on-year in March, SRX flash estimates show.

The total number of resale transactions, however, jumped 40 per cent from February's 951 units to 1,319 in March - the highest monthly volume observed since October.

OrangeTee managing director Steven Tan noted that more home buyers prefer to wait until after the Chinese New Year lull period before house-hunting.

Some buyers are also "lured back to the resale market by the low cash premium they have to pay due to weak market sentiment", he added.

Property consultants are encouraged by the latest data from SRX, expecting that resale activity will pick up though prices might correct further.

"With this trend continuing, we may see transaction volume increase in the coming months as more buyers come back to the resale market in view of stabilising prices," said ERA Realty key executive Eugene Lim. He sees the rental market under pressure from new supply of completed private homes.

HDB data showed an estimated 1,627 flats being rented in March - the highest rental volume in eight months, while overall median rental prices remained flat at $2,300 for the fourth consecutive month.

This is the first time SRX is not publishing flash estimates for cash-over-valuation (COV) following its introduction of the X-value two weeks ago, which estimates the value of a property based on past transacted prices of comparable units.

The introduction of X-value came shortly after HDB tried to turn off the spotlight on COV by changing its resale process, requiring buyers to sign the option to purchase first before getting a valuation.

SRX rolled out another price indicator yesterday - TOX or transactions over X-value - that looks at how much buyers pay over the X-value.

The median TOX for the HDB resale market in March stood at negative $3,000, which means that buyers are paying below recent transacted prices.

"Like the COV, TOX is a forward indicator on how heated the market is," said Jeremy Lee, co-founder of SRX, adding that SRX will start providing the median TOX by HDB towns and property types next month.

Sam Baker, co-founder of SRX, pointed out that TOX is a "neutral measurement" that is forward-looking but will not lead to prices spiralling higher or lower because the underlying X-value is based on past transactions.

In tandem with the negative TOX value, market watchers are expecting a downward trend in HDB resale prices.

"The trend is still towards a softening in resale prices at about 1-2 per cent per quarter as considerable demand for resale flats has already been siphoned to new build-to-order (BTO) flats while the MSR squeezes on affordability," said Ong Teck Hui, national director of research and consultancy at JLL.

Ong Kah Seng, director at R'ST Research, predicts a soft landing of resale HDB prices with a maximum 5 per cent fall for the full year, as the MSR will continue to limit the pool of eligible buyers while there will be more supply of resale flats in the second quarter.

There have been more than 60,000 requests for the X-value since its launch two weeks ago, according to SRX's Mr Lee. SRX will release the median TOX for the private residential market by district and property type next week.

Mr Lee noted that the X-value has closely tracked actual valuations so far, with about 98 per cent of all HDB resale transactions this year within a 10 per cent deviation from the actual valuations and about 81 per cent of transactions are within a 5 per cent deviation.

SRX will roll out the X-value in Hong Kong by June based on data from the Hong Kong Land Registry.

Source: Straits Times 8th April 2014

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HDB resale prices edge up, strong rebound in volume

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