Sliding flat values in tale of two markets

SINKING property prices seem to be the order of the day, so another quarter of tumbling prices came as no surprise.

More notable is an emerging trend that private home prices appear more resilient now than those of HDB resale flats. Since the third quarter of 2013, prices of HDB resale flats have fallen more than those of private homes.

Cooling measures sent private home prices down by 3.8 per cent in the past year, flash estimates indicated yesterday. Housing Board flat values tumbled a steeper 6 per cent in the same period.

Over the year, experts predict that private homes prices will ease 5 to 6 per cent while HDB resale prices slide by 5 to 8 per cent.

This reverses the usual pattern.

Rises or falls in private home prices mostly outpace changes in the HDB market, especially during a global or economic crisis, said Ms Chia Siew Chuin, director of research and advisory at Colliers International.

She cited the 1997 Asian financial crisis when private property prices dived 44.9 per cent as HDB resale prices shed 20.4 per cent. “HDB flats are a basic housing provision… the public segment tends to be insulated from external shocks during those times.”

A shortage of new flats had also forced buyers to look to resale flats, propping up prices, said Mr Ong Teck Hui, JLL national director of research and consultancy.

But the rug seems to have been pulled from under the feet of the HDB market, as demand shifted from resale flats to new flats.

The market is now flush with new HDB flats after the Government ramped up its building programme to meet first-time buyer demand. About 25,000 new flats were launched last year, with 22,000 more due this year.

A mortgage servicing ratio limiting monthly housing payments at 30 per cent of the buyer’s gross monthly income hit many. And newly minted permanent residents can buy an HDB flat only after three years.

Private home buyers have been hurt by tough mortgage lending guidelines and higher stamp duties but one key difference is that high land prices paid by developers act as a limit on discounting.

“They’re floating on thin margins,” as Mr Alan Cheong, research head at Savills Singapore, noted.

Also, private property owners would have gained from the 60 per cent surge in private home prices during the most recent market upswing. They are unlikely to lower their selling expectations.

Still, the private home market could be hit by an external shock, much like the Asian financial crisis, or internal issues, like rising vacancies owing to an oversupply of new homes.

The market will soon abound with completed condo units – many of which have been bought for investments – in the face of a shrinking pool of foreign tenants.

“If loan servicing is affected by reduced rental income, there could be selling pressure resulting in price declines,” said Mr Ong.

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