Wednesday, February 8, 2012

Singapore resale flat market outlook for 2012

Prices of HDB resale flats could fall 3% to 5% this year say the market players in a recent property forum according to Channel News Asia.  But the drop may be more severe if the economic conditions go worse further. The resale HDB prices rose nonstop for the past 5 years thanks to a severe supply crunch of new HDB flats in the first decade of new century. HDB has just built 8,260 new units per year between 2001 and 2008, forcing many newlywed couples to either wait for years before getting a flat or compete for resale flats. A record number of Singapore Permanent Resident intakes between 2005 and 2008 forced demand up further since this group of residents of Singapore can only buy resale HDB flats. The financial bubble over bubble times of last decade made things worse since they have enabled a very high growth in Singapore and resultant artificially low interest rates created artificial affordability.  Result: Over 80 percent increase in the HDB resale prices in the last 5 years! Things are really desperate now. I see people paying 450,000 SGD+ for 3 room flats in the ultra-bad shaped old apartment blocks near my house.

Things have changed since then. In 2011 alone, HDB has released 25,000+ units and promises to release 25,000+ more in 2012 to ease the pain on the first time buyers. Although these flats will not be built for next 2-3 years, they will take away the demand from resale market. Since 2009, the number of Singapore PR intake has significantly declined. The household income ceiling to buy flat directly from HDB is also increased from 8,000 to 10,000.

“ECG Property's managing director Shawn Tan said: "We should be seeing a more sit-back-and-wait attitude from citizens. They will be expecting more flats to be built and they have more options to go for the BTOs and walk-in selections directly from HDB." 
At Wednesday's industry forum, CEOs of several property agencies said demand is also likely to soften with tighter immigration rules, which will reduce the pool of potential home buyers. They expect resale flat prices to fall by three to five per cent this year, and up to 10 per cent if the eurozone debt crisis triggers a global recession. 
HSR Property Group CEO Patrick Liew said: "Unless the economic situation changes, unless we see a lot more foreign direct investment coming in...I think the HDB market will remain flat for the next one to three years." PropNex CEO Mohamed Ismail said: "Public housing resale prices have gone up by over 80 per cent in the last five years...people going in to pick up (units) at high prices and expecting such appreciation in the near future or next five years -- it is definitely not likely (to happen)." 
Market players noted HDB resale prices have reached a peak. This could put some pressure on cash premiums or what's more commonly known as cash over valuation (COV). ERA key executive officer Eugene Lim said: "The COV is already stabilised at between S$30,000 and S$40,000.

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