Wednesday, 16 January 2013

9 in 10 first-timers opt for new HDB flats

Jump in numbers due to more BTO units, pricier resale flats: Analysts
By Daryl Chin, The Straits Times, 15 Jan 2013

ALMOST all first-time buyers of public housing are now opting for a brand new Housing Board flat instead of a resale unit.

The HDB said yesterday that while 55 per cent of first-timers had gone for new flats in 2009, this figure had shot up to 92 per cent last year. The rest had bought a resale flat with a housing grant.

Property analysts attribute this to the ramped-up supply of new Build-to-Order (BTO) flats - including in mature estates popular with buyers - and a higher monthly income ceiling of $10,000 for applicants.

Some first-timers eyeing resale units have also been put off by rising prices and high cash-over-valuation (COV), which requires stumping up a cash quantum above the property's valuation.

PropNex chief executive Mohamed Ismail said some resale flats are now out of reach for young couples thinking of starting a family.

Data from property agencies in the last quarter showed that overall HDB median resale prices had hit a historical high of $455,000 while overall median COV amounted to $34,000.

"Prices have been chased up by demand and many of these young buyers would have difficulty coming up with the COV," he added.

The HDB has said all BTO flats are kept affordable and sold below market prices of resale units in the vicinity. For example, a four-room flat launched last year in Punggol was priced up to $341,000, compared with its resale counterpart of up to $471,000.

This is why many are turning to BTO flats instead, noted Mr Ismail. The greater supply of BTO flats in more places has also boosted the chances of getting one and a shorter waiting time to move in.

To calm the red-hot housing market, the Government has rolled out more new flats, from 9,000 four years ago to a record 27,000 last year.

Some projects last year were in developed estates such as Ang Mo Kio, Queenstown and Toa Payoh, and at least 85 per cent of new units are reserved for first-timers. It has also committed to offer at least 23,000 units this year.

ERA Realty key executive officer Eugene Lim noted that the schedule of BTO flat launches is now more transparent and units are released in larger batches compared with the past, "which means first-timers can plan their purchases better".

He said the higher income ceiling - raised from $8,000 to $10,000 in 2011 - has also widened the pool of potential buyers.

Coupled with grants which can go up to $60,000, first-timers last year on average used less than a quarter of their monthly income to pay off their housing loans, said the HDB. This debt-service ratio, between 21 per cent and 24 per cent, has remained relatively stable in the past four years.

Mr Mohamed Sulaiman, 27, said first-timers like him have little choice but to get a new flat direct from the HDB. The sports executive landed a four-room unit in Choa Chu Kang last year for $227,000. "I would have preferred a resale flat in a more central location but it was too expensive. But all things considered, my new place is near my parents' so I consider it a good deal."

Finance executive Daniel Chia, 27, who got a four-room Woodlands flat for $320,000, zoomed in on BTO units. "It's just not practical for young couples to put themselves at the mercy of sellers and to fork out crazy amounts for cash premiums."

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