Median cash over valuation amount up a third; trend filters to outlying areas
BUYERS of resale Housing Board (HDB) flats paid a median amount of $22,000 in cash over the property’s valuation for their new homes from October to last month, a whopping 30 per cent rise from the previous quarter.
The good news for HDB flat owners in outlying areas is that this trend is filtering outwards towards them from the most popular districts downtown.
HDB data released yesterday showed that 86 per cent of all resale transactions in the fourth quarter of last year required cash payments over valuation, up from 80 per cent in the previous quarter.
However, greater resistance from buyers to the surging prices of resale flats last year resulted in a 13 per cent drop in the number of flats sold, to 6,700. For the whole of last year, 29,436 flats changed hands.
In fact, despite the overall rise, the median cash over valuation (COV) of some units in traditionally more popular estates such as Queenstown actually dropped. The median COV for a five-room flat in that area, which hit $110,000 in the July to September period, actually shrank to $79,000 in the period after that – albeit off a high base.
This, said the assistant vice-president of ERA Singapore, Mr Eugene Lim, showed the extent of the current market resistance towards high COVs.
‘Very often, the deal cannot be closed or takes much longer to close because of unrealistic sellers demanding high COV transactions,’ he said.
The chief executive of PropNex, Mr Mohamed Ismail, said another reason for this phenomenon is that the number of flat buyers with thick wads of cash in hand – mostly due to the collective sales of their private homes – is shrinking.
Most people buying HDB flats rely heavily on home loans to finance their purchase.
Resale prices of HDB flats rose 5.7 per cent during the quarter to bring the year’s growth to 17.5 per cent.
Last year’s growth is the biggest in a decade but property agents are not expecting a repeat for now as the HDB is offering at least 4,500 new flats for the first half of this year to calm buyers worried that housing is growing out of their reach.
These flats, which are highly subsidised, have an advantage over resale flats because they do not require buyers to fork out cash over valuation.
While ERA’s Mr Lim expects the price of resale flats to grow by 5 to 8 per cent this year, Mr Ismail reckons it would move by about 10 per cent.
Mr Ismail pointed out: ‘The economy is still doing well. And the labour market is tight.’
Source: The Straits Times 26 Jan 08