(G) News on HDB Resale Market

• (G.1.) HDB resale flat prices surge 6.6%

HDB resale prices went up 6.6% in the third quarter. In the second quarter, the prices increased 3% and the two quarters’ aggregate brought this year’s total price increase to a double digit growth of 11%.

However, in terms of volume, HDB re-sale transactions fell 11% to 7,700 in the third quarter, after a 38% rise in the previous quarter.

Third-quarter HDB data showed the amount of cash-over-valuation that buyers are paying has increased substantially across the board, though the movement is more pronounced in popular neighbourhoods.

Increases in the median prices of three-room flats in Ang Mo Kio (central) were 11.8%, in Bedok (east) 6.4% and Queenstown (central) 5.6% respectively. And for five-room flats, they grew at 13.1%, 16% and 20.6% respectively.

In Clementi, Bukit Timah and Toa Payoh, the median COV for executive flats hit $155,000, $137,500 and $127,000. However, the figures might not be representative of the overall market situation as the transactions were fewer than 20 flats in these areas.

In general, the areas requiring the least cash-over-valuation were Woodlands, Yishun and Bukit Panjang. (See Annex B for details)

The Central area, Queenstown and Marine Parade were the locations where buyers have to fork out more cash in order to stand a chance to own a flat there.

• (G.2.) Median Cash-Over-Valuation (COV) for HDB resale flats up 140%

About 80% of resale flats in the third quarter attracted cash over valuation (COV). The median price is now $17,000 above valuation. It was $7,000 in previous quarter. As such, the increase in median COV is 140%.

However, the number of resale transactions fell 11% in the third quarter from 8,700 to 7,700.

The price increases were more pronounced in popular neighbourhoods such as Ang Mo Kio, Bedok, Queenstown, Clementi, Bt Timah and Toa Payoh.

The quantum of the price increase clearly shows the strength of the demand due to a robust economy. In response, HDB has expedited its building programme. More than 26,700 flats are expected to be completed between 2007 and 2011.

A market survey indicates that asking prices for larger flat types may vary some $50,000 to $200,000 above valuation. Traditionally, when there is a bull-run, larger flats such as Executive Maisonettes (EM) and Executive Apartments (EA) in choice locations would achieve a larger quantum in capital appreciation – sometimes as high as more than $100,000 a year. (See Annex A for a case study on Tampinese E flats)

• (G.3.) Marine Parade 5-room flat sold for $750,888

A retired couple paid a record $750,888 for a 32-year-old 5-room Marine Parade flat on 27 November. The 23rd storey flat was recently renovated and it offers full sea views.

Another push factor for the record price is the block’s proximity to the underpass that leads to East Coast Park. The old couple has previously lived abroad in Germany and Australia and their previous homes also offered sea views.

The last HDB record price of $730,000 was also set by a 5-room flat in Marine Parade in early November. It is also situated on a high floor and near East Coast Park.

But analysts say the highest record price is not typical of HDB market. This is because the old couple bought it as their retirement home and has paid cash for it. Had they been an ordinary couple, they might not have been able to take a bank loan for it.

(H) Where is the market heading?

The Singapore Dream is far from over. In fact, it is just the beginning.

While there will be more new houses available for sale in 2008, demands will also be higher as more foreigners and local upgraders from the heartlands are coming out in force to meet the supply.

Forget about ‘buyer’s market’ or ‘seller’s market. Get ready for ‘Agent’s Market’.

• (H.1.) En bloc sellers will support home prices

About 5,700 residential units from the 39 private apartment projects were sold collectively in the first half of 2007. Owners of these units will have to look for replacement homes sooner or later.

Assuming two-thirds of them do come out and buy a property, it would be about 3,900 homes to be transacted. As the total payout to en bloc sales during the period was $6.381 billion, the expected transactions later on when the en bloc sellers start to make their replacement purchases, could be worth $4 billion, plus minus a few ten millions.

As prices in the prime area are already near historic peak, developments in the fringe and suburban areas such as Bukit Timah, Upper Bukit Timah, Clementi, Novena/Thomson, and Upper East Coast will be the most likely targets.

Out of the 5,700 owners affected by collective sales in the second quarter of 2007, about 2,795 of them owned homes in the prime districts of District 9, 10 and 11. And 50% of such owners already have at least two properties.

Likewise, rents will also increase due to the same reason as ‘displaced tenants’ would also need alternative accommodation.

• (H.2.) Continual arrival of expatriates to drive rents

The number of expatriates working in Singapore has grown by an impressive 14.9% from 875,500 in 2006 to over one million so far in 2007. This is the highest annual growth in the arrival figures in a decade.

With the familiar full employment rate returning to Singapore and the buoyant economy generating a phenomenal rate of high-end jobs, the number of expatriates in Singapore is expected to explode.

As it is, average apartment rents in the prime districts rose by 13% to $3.70 per square foot (psf) a month between the second quarter and third quarter of 2007. The high-end residential rents continue to rise to $6 psf a month.

Average rents shot up even higher in the other non-prime areas. For example, average rents in Districts 8 and 12, on the fringe of the city, have risen by 35% and 23% respectively to about $1.90 psf a month.

• (H.3.) The ten largest HDB heartlands sell more flats - the smallest estates command the highest price

This trend will continue for some years. In fact, the entire HDB resale market is getting warmed up and will be more exciting by the days.

Despite the perceived ‘quietness’ in the market, the HDB resale market clocked in 2,340 (advanced estimate) resale transactions compared with the previous month’s 2,463 deals.

With the complete input of sales figure to be updated by the end of the first week of December, the November resale figures should be higher than October.

The volume of HDB resale transactions has been gradually rising, reflecting an economy in expansion. Below shows a breakdown of increases in transaction volume over the previous months.

With a very promising economic prospect, two categories of resale flats will take the lead to climb the price ladder – one is flats in choice location and the other, the larger Executive flats.

For example, 5-room flats in Marine Parade have been dominating the headlines. However, the total resale transactions in Marine Parade in November were only 17 flats. The breakdown is as follows: 3-Room flats sold: 8; 4-Room flats sold: 6; 5-Room flats sold: 3.

Out of the three sold, two made it into the headlines of national newspaper in the month of November.

Another example is Executive flats in Tampines. The capital value of Executive flats in Tampines has risen by 30% year-on-year and the quantum of increase is $129,000 for the best unit there. (See Annex A & Annex B for details)

• (H.4.) Private home market isn’t fairing badly either

The private property market is on a path of modest and steady growth on the back of a strong and sustainable economy.

In fact, the median transacted price for private apartments across the island rose 3.3% from $960 psf in September to $992 psf in October.

While buyers may become more cautious in the wake of the scrapping of the deferred payment scheme, the private home market is not expected to collapse. The number of new private home units launched and sold will likely to remain close to current levels.

In the Central Core area
Hilltops in the Cairnhill area, and Scotts Square, sold quite well with 24 units and 33 units sold respectively.

The first unit at Boulevard Vue at Angullia Park was sold in October for $3,900 psf. The first 20 units in the 28-unit Suites @ Amber were sold at between $1,224 psf and $1,440 psf.

In the East coast area
In the mid-range, new projects in the east such as Aalto, De Centurion, Suites @ Amber and The Seafront On Meyer achieved median prices ranging from about $1,300 to $1,600 psf.

In the Western area
Park Natura in Bukit Batok sold 101 units and became the top seller in primary market sales during October, followed by a distanced second of 49 units sold at Aalto in the Amber Road/Peach Garden vicinity.

Park Natura's median transacted price was $1,022 psf; while Aalto about $1,300 psf.

Developers should be able to sell about around 2,000 new homes in the last quarter of this year, bringing their full-year sale tally to around 16,000 units. They sold 11,147 new private homes for the whole of 2006.

The official URA private home price index, which has already risen 22.9% in the first three quarters from end-2006, is likely to go up to 27% for the whole year.

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