Very obvious the super strong HDB market is going to hold up the mass to mid-end condo market.



HDB resale market going strong

Deals of more than $700K are still being done, with demand fuelled by PRs and new families

By Joyce Teo, Property Correspondent


While sentiment in the private homes market remains gloomy, the market for Housing Board resale flats offers another story.

Deals of $700,000 and above are still being done this year, after 'record deals' of more than $700,000 first surfaced during last year's boom, though these are few and far between.

The good news for sellers is that prices continue to rise, pushing up valuations.

Volume is seen remaining healthy as home seekers continue to check out resale flats, largely oblivious to the credit crisis consuming the world, market watchers said.

Demand for HDB resale flats comes mostly from newly formed families and new permanent residents (PRs), they said.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, thinks that HDB prices are still rising because there is not enough supply to meet demand.

'For example, last year, there were about 78,000 new citizens and PRs. So they may be buying HDB flats which they may not have been eligible to buy previously,' he said.

HDB flat seekers also include those who are priced out of the private market given that mass market prices there remain relatively strong.

But there is a limit to the gains for an HDB seller. Already, HDB prices are considered high, said Mr Leong.

Also, agents say that buyers are showing more resistance to sizeable cash-over-valuation (COV) amounts. The COV is the cash sum that is paid over and above the valuation of a flat.

It cannot be paid from a home loan or with Central Provident Fund monies.

Generally, once you cross the barrier of $600,000, there will be strong resistance, said the assistant vice-president of ERA Asia Pacific, Mr Eugene Lim.

High-priced transactions have been registered in a few estates such as Marine Parade, Queenstown and Bukit Merah. For instance, a $750,000 deal for a 10-year-old, high-floor 124 sq m unit in Holland Close in Oueenstown was recorded in June.

Once a high-priced deal is done, sellers in the area will raise their asking prices. But these may not be realistic, said Mr Lim.

Increasingly, potential buyers are feeling the pinch of rising costs and negotiating harder for a smaller COV amount, particularly for non-prime flats, he said.

'People are more cost-conscious now.'

For suburban locations, asking levels for COV amounts have come down, said HSR Property Group's executive director, Mr Eric Cheng.

'I would say that $15,000 to $25,000 is common for non-prime districts. Previously, people were asking for $30,000 to $40,000,' he said.

'The resale index rose because of higher valuations.'

Valuations are made based on historical data.

Going forward, HDB resale prices look set to rise, but likely by a smaller margin.

In its second-quarter data release in end-July, HDB said that it planned to offer about 3,900 new flats under the Build-to-Order (BTO) system over the next six months. These will be in towns such as Punggol, Sengkang and Bukit Panjang.

For the whole of this year, HDB has a planned supply of 8,400 new BTO flats, up from the 6,000 flats offered last year and just 2,400 BTO flats in 2006. These BTO flats are the main supply of new flats.

With more new flats coming on the market, some demand will be taken away from the resale market, said Mr Lim.

He expects an overall price rise of 10 to 15 per cent, including an 8.2 per cent rise in resale prices in the first half of this year.

Mr Cheng believes the rise in the next 12 months will not be more than 5 per cent.

Last year, HDB resale prices rose by 17.5 per cent.

HDB prices will support the private mass market sector, but selectively. A lot still depends on the general economic outlook, said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

When the economic outlook is less buoyant, HDB upgraders are likely to stay put rather than move to another estate to upgrade, he said.

Typically, demand for a private suburban launch comes primarily from the same housing estate. Unless the market is generally buoyant, sales will start to slow once this pool of buyers runs out, he added