Resale prices for HDB flats continued their decline in Q4 2014 — a result of a
convergence of measures imposed last year and an increased supply of new flats.
According to data from HDB flash estimates released today, resale flat prices fell 1.4 per
making the overall decline of prices for 2014 at 6.1%.
This is the largest decline since 2002 (when the 2001 index fell 8.2 per cent in the year),
noting that HDB adopted the new computation of the Resale Price Index
– Stratified Hedonic Regression method.
Period Price Index Q-on-Q change
Q1 2014 143.5 -1.6%
Q2 2014 141.5 -1.4%
Q3 2014 139.1 -1.7%
Q4 2014 137.1 -1.4%
Total decline in 2014 so far -6.1%
Source: HDB, based on the Stratified Hedonic Regression method
The various measures, including loan curbs and the strong supply of new flats, continue
to reduce the demand for resale flats, which brought about the sustained price decline.
MSR main reason for the sustained decline
The falling resale prices are due to the potent combination of the government’s measures
to stabilise the public housing market such as, reducing the Mortgage Servicing Ratio
(MSR) cap of 30 per cent and the maximum loan term of 25 years for HDB mortgage
loans, three-year wait for new PRs before they can buy resale HDB flats, and allowing
singles to buy two-room BTO flats in non-mature estates.
In addition, since March, the buyer can only obtain the valuation report after the deal is
sealed and the Option to Purchase has been granted to him. This has also created a
more cautious approach from buyers, as they are more careful when giving an offer for a
particular flat.
Home-buying sentiment more subdued
Mr Ismail does not expect a turnaround this year, given a looming flood of new homes
and the continued impact of property measures such as lower mortgage servicing ratio,
shorter loan tenure and a minimum three-year waiting period for PRs wanting to buy
HDB resale flats.
“Home buyers are more restrained if their MSR is over 30 per cent or TDSR is near 60
per cent. Loan curbs and softer prices will ultimately mean that HDB upgraders will find it 2
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more prohibitive to upgrade to a private property,” concluded Mr Ismail Gafoor, CEO of
PropNex Realty.
“As predicted in the beginning of 2014, I expected the HDB resale prices to soften 6 to 7
per cent for full-year 2014, with volume hitting around 16,500 to 17,000 units — the
lowest in the last decade. I think our prediction remains till the full results are released at
the end of this month,” commented Mr Ismail Gafoor.
“The outlook for 2015 will continue to be moderated with a possible 5 to 6 per cent full
year price drop. This is mainly due to the increased number of 2nd timers collecting their
keys to their new BTO flats, and they will have to sell their existing flats within 6 months.
This figure is expected to be about 6,000 annually for the next 2 years.”
Singapore’s private home prices with the biggest drop since 2009
URA’s Q4 2014 flash estimates shows that prices of private homes in Singapore
continue falling by 1.0 per cent quarter-on-quarter (QoQ), with an overall 2014 price fall
of 4.0%.
The price decline since 2009 reflects the market sentiments and the impact of the cooling
measures.
Period Price Index Q-on-Q change
Q1 2014 211.6 -1.3%
Q2 2014 209.4 -1.0%
Q3 2014 207.9 -0.7%
Q4 2014 205.8 -1.0%
Total decline in 2014 so far -4.0%
Source: URA
In both primary and resale markets, homebuyers’ remained averse to properties with a
large quantum. With their persistent price sensitivity and the reduction in their purchase
budget under the strict TDSR framework, prices of homes in all regions registered
decreases.
Prices of homes in the RCR fell the most for 2014 at 5.2 per cent while at the CCR, the
affluent home buyers who have the holding power are taking their time to identify their
next investment property and are also looking out for overseas properties. As a result,
CCR properties recorded an overall drop in its price at 4.1%, not as significant as those
in the RCR.
Price fall of mass market homes in the OCR went at 0.9 per cent drop in Q4. The
sustained fall in OCR prices is the result of TDSR, which has an impact on the mass
market segment where the capacity to take up loans is critical for middle income buyers.
Mr Ismail believes that more potential buyers are finding greater difficulty to invest in a
private home with a price quantum beyond $1.3 million given the lending curbs.
Outlook for 2015
While reasonably-priced homes with desirable product and location attributes will
continue to find favour with homebuyers, the private residential market looks set to
continue its price decline, with weak demand due to various factors — with the TDSR
and ABSD working in tandem to rein in exuberant home buying. Buyers are now more
discerning and are taking a longer time to decide on investing in private homes.
Additionally, HDB resale flat prices have further softened, thus reducing the motivation
for HDB owners to upgrade to mass market private properties as their purchasing power
have been affected– due to a mix of abundant incoming supply, continued enforcement
of cooling measures and public housing regulations such as the tighter MSR on HDB
loans.
In light of recent sales performance, market conditions and continued enforcement of
government measures, home prices in across all regions are expected to slide further.
Mr Ismail concludes: “With TDSR being a long-term instrument—and together with the
ABSD, will continue dampen any speculative activity. Under such an environment, we
expect price weakness to persist into 2015, with possible negative price growth of 4 to
5%, unless the government tweaks some of its cooling measures. With 5 consecutive
quarters with drop in prices and lukewarm activities in the volume of transactions, it is
timely to look into tweaking some of the cooling measures, namely the ABSD.”
Source: Propnex