http://www.todayonline.com/business/cov-hdb-flats-falls-zero-resale-volume-slumps?singlepage=true
SINGAPORE — The median cash-over-valuation (COV) for Housing and Development Board (HDB) flats fell to zero last month for the first time in at least eight years, a further sign that the Government’s cooling measures have been effective in taking the heat out of the public housing resale market.
The fall, from the S$3,000 COV in January, came as resale volume declined to an estimated 734 units last month from 918 units previously, the Singapore Real Estate Exchange (SRX) said in its flash report yesterday.
It was the first time that the median COV hit nil since it started compiling this data in 2006, the SRX said.
Analysts whom TODAY spoke to said the cooling measures — such as the reduction of the mortgage servicing ratio to 30 per cent, the reduction of the maximum term loan on HDB loans to 25 years and the three-year wait imposed on permanent residents, as well as allowing singles to buy directly from the HDB — continued to weigh on the resale market.
However they said the curbs are expected to remain in place. The slower activity last month could also be attributed to the Chinese New Year holidays, they said, adding that it was probably too early for the Government to start rolling back some of the property curbs.
Mr Ku Swee Yong, Chief Executive of real estate agency Century 21, said: “I don’t think the Government will step in, unless there are so many below-valuation cases that the valuations drop drastically.
“In the last two quarters, the HDB index dropped and they considered the market stable, so if the decline continues in the next two quarters at about the same pace, they will not panic.
“If the resale price index drops 10 per cent a quarter, then that is alarming,” Mr Ku added.
The HDB’s official Resale Price Index had fallen by 0.9 and 1.5 per cent in the last two quarters of last year, but the declines pale in comparison with the 102.9 per cent surge in the resale price index from the first quarter in 2006 to its peak in the second quarter of 2013.
Zero COV is also a sign that the market is stabilising, analysts said.
Mr Nicholas Mak, Executive Director for Research and Consultancy at property firm SLP International, said: “Zero COV does not mean a disaster. It means that the transaction price is in line with valuation and is a sign of more stability in the market. So I think the Government will probably let the market be and see how things turn out in the next few months.”
The SRX said 12 out of the 26 HDB towns saw resale deals done below or at parity with valuation last month, an increase from eight estates in January. Analysts noted that the estates with the most negative-COV transactions were those located far from the central region, including Sengkang, Woodlands and Jurong West. On the other hand, better-located towns such as Bishan and Clementi still fetched good COVs, they said.
Despite the latest fall, potential buyers are not expected to return to the market in droves, with many adopting a wait-and-see approach.
The rule requiring newly-minted PRs to wait three years before they are allowed to buy an HDB flat has also choked off a large chunk of demand.
“Many prospective buyers are still waiting for prices to go down further, so it will still be a situation where we have more sellers than buyers,” Mr Ku said.
Mr Alan Cheong, Senior Director for Research and Consultancy at real estate consultancy Savills, said that in this environment, it may be the right time for the Government to start scaling back the cooling measures before the market crashes.
“It’s not healthy at this pace; if COV continues to drop by S$3,000 a month, within 10 months it will be S$30,000 below valuation,” he said.
SINGAPORE — The median cash-over-valuation (COV) for Housing and Development Board (HDB) flats fell to zero last month for the first time in at least eight years, a further sign that the Government’s cooling measures have been effective in taking the heat out of the public housing resale market.
The fall, from the S$3,000 COV in January, came as resale volume declined to an estimated 734 units last month from 918 units previously, the Singapore Real Estate Exchange (SRX) said in its flash report yesterday.
It was the first time that the median COV hit nil since it started compiling this data in 2006, the SRX said.
Analysts whom TODAY spoke to said the cooling measures — such as the reduction of the mortgage servicing ratio to 30 per cent, the reduction of the maximum term loan on HDB loans to 25 years and the three-year wait imposed on permanent residents, as well as allowing singles to buy directly from the HDB — continued to weigh on the resale market.
However they said the curbs are expected to remain in place. The slower activity last month could also be attributed to the Chinese New Year holidays, they said, adding that it was probably too early for the Government to start rolling back some of the property curbs.
Mr Ku Swee Yong, Chief Executive of real estate agency Century 21, said: “I don’t think the Government will step in, unless there are so many below-valuation cases that the valuations drop drastically.
“In the last two quarters, the HDB index dropped and they considered the market stable, so if the decline continues in the next two quarters at about the same pace, they will not panic.
“If the resale price index drops 10 per cent a quarter, then that is alarming,” Mr Ku added.
The HDB’s official Resale Price Index had fallen by 0.9 and 1.5 per cent in the last two quarters of last year, but the declines pale in comparison with the 102.9 per cent surge in the resale price index from the first quarter in 2006 to its peak in the second quarter of 2013.
Zero COV is also a sign that the market is stabilising, analysts said.
Mr Nicholas Mak, Executive Director for Research and Consultancy at property firm SLP International, said: “Zero COV does not mean a disaster. It means that the transaction price is in line with valuation and is a sign of more stability in the market. So I think the Government will probably let the market be and see how things turn out in the next few months.”
The SRX said 12 out of the 26 HDB towns saw resale deals done below or at parity with valuation last month, an increase from eight estates in January. Analysts noted that the estates with the most negative-COV transactions were those located far from the central region, including Sengkang, Woodlands and Jurong West. On the other hand, better-located towns such as Bishan and Clementi still fetched good COVs, they said.
Despite the latest fall, potential buyers are not expected to return to the market in droves, with many adopting a wait-and-see approach.
The rule requiring newly-minted PRs to wait three years before they are allowed to buy an HDB flat has also choked off a large chunk of demand.
“Many prospective buyers are still waiting for prices to go down further, so it will still be a situation where we have more sellers than buyers,” Mr Ku said.
Mr Alan Cheong, Senior Director for Research and Consultancy at real estate consultancy Savills, said that in this environment, it may be the right time for the Government to start scaling back the cooling measures before the market crashes.
“It’s not healthy at this pace; if COV continues to drop by S$3,000 a month, within 10 months it will be S$30,000 below valuation,” he said.
