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HDB price gains expected to ease after 17.4% rise

IT’S official: HDB flat prices enjoyed a spectacular bull run with a 17.4 per cent gain last year – the strongest growth in a decade – but market watchers say a repeat this year is unlikely.

Industry experts estimate that this year’s total growth figure will be less than 10 per cent, due to general resistance in the HDB mass market to higher prices.

Flash estimates released by the Housing Board (HDB) yesterday for the fourth quarter ended Dec 31 showed home prices grew 5.6 per cent from the previous quarter. This is a dip from the strong 6.6 per cent rise in the third quarter and brings the total growth for last year to 17.4 per cent.

The fourth quarter slowdown was expected, due to the recent onset of a more cautious mood among home buyers, said housing analysts.

‘The high resistance level in the resale market is also due to unrealistic sellers demanding high COVs,’ said ERA Realty’s assistant vice-president Eugene Lim.

COV, or cash over valuation, is the cash buyers need to pay upfront over and above a flat’s market valuation.

HDB’s third-quarter data, for example, showed median COVs pushing $100,000 for five-room flats in the Marine Parade, Queenstown and Central areas.

Most HDB buyers cannot afford such money upfront, and this led to a drop in transactions in the fourth quarter, said Mr Lim.

The hiatus in property launches in the private sector also contributed to a general slowdown in resale activity, said HSR Property Group executive director Eric Cheng.

He has put this year’s forecast for HDB flat price growth at a modest 5 per cent to 8 per cent.

‘HDB resale prices also have limited growth, as the government tries to keep homes affordable by offering more supply,’ he added.

PropNex chief executive Mohamed Ismail, however, is more bullish, saying growth could hit 10 per cent or 11 per cent, if Singapore’s economy continues to perform well.

‘There are still many cash-rich buyers from en bloc sales looking in the resale market,’ he said.

Prices in the resale market will still be fuelled by high demand this year, he added.

To address the current housing shortage, HDB recently announced plans for about 4,800 new flats in the first half of this year under its build-to-order scheme, in which flats are built only when a certain level of demand is reached.

It also recently launched a plum site in Bishan for condo-style HDB homes to be built, with more such sites in Simei, Toa Payoh and Bedok to come.

The full data for the fourth-quarter of last year will be released at the end of the month, said HDB.

 

Source: The Straits Times 3 Jan 08

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