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Buyers paying way above valuation for HDB flats

IF YOU are looking to buy an HDB resale flat, make sure you have plenty of cash on hand.

Due to soaring home demand, an average HDB resale flat now costs $17,000 above its valuation from $7,000 just three months ago.

This figure, called the cash-over-valuation amount, has to be paid in cash by a buyer under current rules.

Five-room flats in popular areas like Queenstown are going for about $110,000 above valuation, according to data released by the Housing Board yesterday.

In addition, more flats are being sold at higher prices.

Between April and June, only three out of every 10 resale flats went above valuation. Since July, however, this has applied to eight out of 10 flats, the HDB said.

The higher prices, however, may be starting to deter buyers.

The number of resale flats sold in the third quarter fell 11 per cent to 8,700, after rising 38 per cent in the previous three months.

HDB resale prices are soaring because rising private home prices are pushing buyers to the cheaper public housing segment.

Taking advantage of growing demand, flat sellers are now asking for prices that are significantly higher than valuations.

But this is creating unhappiness among buyers, said property agents.

‘With these kinds of asking prices, we are beginning to see some resistance in the market,’ said Mr Eugene Lim, assistant vice-president at property agency ERA Singapore.

‘The typical HDB homebuyer does not have or does not want to fork out too much cash. It just does not make sense.’

ERA’s data show that in the third quarter, there were fewer resales of all types of flats, from one-room units to executive flats.

But Mr Ku Swee Yong, director of marketing and business development at Savills Singapore, suggested that the lower sales could simply be due to the Hungry Ghost month in the third quarter.

Another property agency, PropNex, said the drop in flat sales is only slightly significant.

Over the last 10 years, the number of resale flats sold was 6,500 to 8,000 for most quarters.

Even with the fall in transactions in the third quarter, 7,700 resale flats were sold, said PropNex’s chief executive, Mr Mohamed Ismail.

‘It may be too early to conclude from this dip that consumers are price sensitive,’ he said, unless ‘the number of transactions continues to drop’.

Mr Ismail agreed, however, that the cash-over-valuation amount had increased significantly.

‘Today, without at least $50,000 in cash, homebuyers will not be able to purchase a resale flat in the Central location,’ he said.

According to HDB figures, buyers of executive flats are forking out the highest median cash-over-valuation amounts.

The median amount – the point at which half the homes sold for more cash and half for less – hit $155,000 in Clementi.

Overall, the median amount for this flat type was $25,000.

For four- and five-room flats, buyers paid a median of $18,000 above valuation. For two- and three-room flats, the amount was $15,000.

The highest amount paid above valuation for a five-room flat was $91,500. The figures were $57,500 for a four-room flat and $40,000 for a three-room flat.

In general, the areas requiring the least cash-over-valuation were Woodlands, Yishun and Bukit Panjang.

On the other end of the spectrum was the Central area, Queenstown and Marine Parade.

The HDB said, however, that in some of these cases, there were fewer than 10 sales of the specific flat type in that area. This means the figures may not be representative.

 

Source: The Straits Times 27 Oct 07

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