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Business Times - 26 Mar 2012
HDB upgraders between a rock and a hard place
Falling cash-over-valuation makes it harder for them to upgrade to private housing
By MINDY TAN
(SINGAPORE) With cash-over-valuation (COV) figures - the cash premium paid by buyers over an HDB flat's valuation - continuing to fall amid a slowing resale market, HDB upgraders are facing an increasingly uphill task of moving into the private market
The lower COVs have made it harder for people upgrading to private property since they will have less cash on hand, noted Chua Chor Hoon, head of Asia Pacific Research at DTZ. HBD upgraders constitute an important source of demand for mass market private projects.
Png Poh Soon, Knight Frank's head of consultancy and research, added: 'Prices of resale flats have appreciated significantly. For existing owners, there is no reason for them to sell at a lower price as private properties are not cheap either. To upgrade and avoid taking excessive financial burden, many need to sell off their existing HDB.'
'(On the other hand) buyers with financial constraints will turn to BTOs (build-to-order flats) because it is cheaper (while) those who can afford ECs (executive condominiums) believe they are getting a better deal as the price quantum between some resale flats and ECs are very close.'
'Existing HDB owners looking to sell their units are therefore caught in a bind... Owners of resale units asking for higher prices may have to market their units longer so that they are able to attract the 'right' type of buyers. So long as private market prices continue to hold, HDB resale prices should remain stable. If the former increases further, HDB resale prices will also escalate.'
That more alternatives - in the form of the ramp-up in supply of BTO flats and ECs - are now available to buyers has also played a part in lowering demand.
ECs, a public-private hybrid, which are sold with condominium-like facilities, may be particularly attractive to buyers, given that the price quantum between some resale flats and ECs is only between 10 and 15 per cent, pointed out Knight Frank's Mr Png.
Various policy changes have further sweetened the allure of ECs. For instance, the monthly household income ceiling was increased from $10,000 to $12,000, making it easier for first-timer households to take the EC route, noted ERA Realty key executive officer Eugene Lim, in a report issued in February.
Further, Minister for National Development Khaw Boon Wan's promise to modify existing balloting rules for second-time buyers looking for BTO flats has further encouraged many to hold back their move into the resale market, he added.
'Should the new rules substantially increase the number of BTO flats made available to second-time buyers, the HDB resale market may be greatly impacted since these buyers form the bulk of the resale market,' said ERA's Mr Lim.
HDB upgraders between a rock and a hard place
Falling cash-over-valuation makes it harder for them to upgrade to private housing
By MINDY TAN
(SINGAPORE) With cash-over-valuation (COV) figures - the cash premium paid by buyers over an HDB flat's valuation - continuing to fall amid a slowing resale market, HDB upgraders are facing an increasingly uphill task of moving into the private market
The lower COVs have made it harder for people upgrading to private property since they will have less cash on hand, noted Chua Chor Hoon, head of Asia Pacific Research at DTZ. HBD upgraders constitute an important source of demand for mass market private projects.
Png Poh Soon, Knight Frank's head of consultancy and research, added: 'Prices of resale flats have appreciated significantly. For existing owners, there is no reason for them to sell at a lower price as private properties are not cheap either. To upgrade and avoid taking excessive financial burden, many need to sell off their existing HDB.'
'(On the other hand) buyers with financial constraints will turn to BTOs (build-to-order flats) because it is cheaper (while) those who can afford ECs (executive condominiums) believe they are getting a better deal as the price quantum between some resale flats and ECs are very close.'
'Existing HDB owners looking to sell their units are therefore caught in a bind... Owners of resale units asking for higher prices may have to market their units longer so that they are able to attract the 'right' type of buyers. So long as private market prices continue to hold, HDB resale prices should remain stable. If the former increases further, HDB resale prices will also escalate.'
That more alternatives - in the form of the ramp-up in supply of BTO flats and ECs - are now available to buyers has also played a part in lowering demand.
ECs, a public-private hybrid, which are sold with condominium-like facilities, may be particularly attractive to buyers, given that the price quantum between some resale flats and ECs is only between 10 and 15 per cent, pointed out Knight Frank's Mr Png.
Various policy changes have further sweetened the allure of ECs. For instance, the monthly household income ceiling was increased from $10,000 to $12,000, making it easier for first-timer households to take the EC route, noted ERA Realty key executive officer Eugene Lim, in a report issued in February.
Further, Minister for National Development Khaw Boon Wan's promise to modify existing balloting rules for second-time buyers looking for BTO flats has further encouraged many to hold back their move into the resale market, he added.
'Should the new rules substantially increase the number of BTO flats made available to second-time buyers, the HDB resale market may be greatly impacted since these buyers form the bulk of the resale market,' said ERA's Mr Lim.
