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Prices of private homes and Housing and Development Board (HDB) resale flats hit a new all-time high in the second quarter of the year.

According to flash estimates from the Urban Redevelopment Authority, private home prices increased by 0.8 per cent from the previous quarter, faster than the 0.6-per cent increase seen in the first quarter, to hit a new all-time high of 214.9 points.

Meanwhile, flash estimates from HDB showed that prices of resale flats rose by 0.5 per cent.

This was the lowest quarter-on-quarter growth since Q1 2009, signalling that the market is showing signs of stabilising.

Mass market properties in suburban areas have seen strong demand in recent months. They drove the increase in private home prices for the second quarter.

Home prices in suburban areas jumped by three per cent, almost double the 1.4-per cent rise in the first quarter.

Donald Han, special adviser at HSR Property Consultants, said: “In the month of March, we sold more than 3,000 units, including executive condominiums. Whenever developers start to reach a certain sales point of about 60, 70 per cent of sell-out, they’ll start to reduce their discount factor and this discount factor reduction basically increases the net pricing.”

Prices in the rest of the central region saw the same 0.2-per cent increase as in the first quarter.

But for the first time in more than a year, luxury homes in the city dipped by 0.2 per cent.

Some analysts said it is a sign that property cooling measures are taking effect.

As for the HDB resale market, prices are also showing signs of moderating.

Eugene Lim, key executive officer at ERA Realty Network, said: “In particular, it’s the capping of the Mortgage Servicing Ratio (MSR), which was announced earlier this year. If you take an HDB loan, your mortgage servicing ratio is 35 per cent and if you take a bank loan then it’s 30 per cent.

“With this cap, it basically limits the quantum of loan which a buyer can take from the bank, because if he exceeds his MSR, he’s forced to borrow less, so this inevitably affects the demand of properties.

“With all the cooling measures that have been put in place, and also with the HDB’s continued ramped-up supply of new flats, this is actually putting a check on the rate of price increase of HDB resale flats.”

Mr Han said: “The government has been aggressively trying to dish out the Sale of Balance Flats, which are very attractive and is a direct competitor of the demand… (for) HDB resale (flats). So the more the government comes up with the Sale of Balance Flats, it helps to take a strong component out of the resale market.

“On top of that, I think the government is starting to address special priority schemes – first-timers, second-timers, young couples with children, singles will be able to bid, some of the elderly will be able to bid on special priority scheme – this takes a chunk of demand out of the HDB resale market and into the BTO as well as the direct market affecting the Sale of Balance Flats.”

The volume of resale transactions reached an all-time low last quarter and analysts said this low transaction volume is expected to continue.

Cash premiums for HDB flats have also gone down.

Mr Lim said according to his firm’s data, the overall median Cash-Over-Valuation has gone down by 15 per cent.

HDB has also announced that starting this month there will be tighter restrictions on the use of CPF funds for those buying HDB resale flats with shorter leases. Analysts said this is likely to put some downward pressure on HDB resale flats in the months ahead.

Mr Lim said: “Places like Tanglin Halt, Commonwealth, these are some of the places that will be affected by this new restriction. Prior to this restriction, there was no restriction for HDB. So you’ll find that old flats in premium locations are asking for very high premiums, they basically follow the resale market.”

The total price rise for HDB resale flats so far this year is 1.8 per cent.

Some analysts expect the total increase in HDB resale prices this year to be about three to five per cent, down from 6.6 per cent last year.

Source – CNA – 1 Jul