Wednesday 4 December 2013

Supply of new HDB flats to be reduced from 2014

By Janice Heng, The Straits Times, 3 Dec 2013

THE supply of new flats will be tapered off from next year, Minister for National Development Khaw Boon Wan said yesterday.

His comments came at the close of the Housing Board's largest-ever launch of Build-to-Order (BTO) and balance flats.

A three-year period of ramped-up supply, which has seen more than 77,000 BTO flats launched, has "begun to restore the balance in our housing market", Mr Khaw wrote on the ministry's blog.

He noted lower cash premiums in the resale market and falling application rates for new flats as signs of this new balance.

The average BTO application rate was 2.9 per flat this year, down from a high of 5.3 in 2010. No figure was given, but he added the tapering off will be done "in a measured way to allow the market to gradually adjust".

ERA Realty key executive officer Eugene Lim expects the pace of building to take a cue from the marriage rate. As previously unmet demand is fulfilled, first- time married couples will once again drive demand for new flats.

OrangeTee head of research Christine Li believes the Government will look to build around 18,000 new flats a year.

Meanwhile, the November BTO launch faced a lukewarm response ahead of its close at midnight last night. As of 5pm yesterday, there were 1.2 first-timers applying for each BTO flat. The rate for second-timers was 2.4, down from a high of 25.9 in November 2011, noted Mr Khaw.

Demand from singles remained strong, with more than 25 vying for each two-room flat.

But Mr Khaw added that this was down from the rate of 57.5 in July, the first time singles were allowed to buy new flats.

Analysts said the overall low demand was unsurprising given the large joint launch, with balance flats - those remaining from previous launches - usually siphoning off some BTO demand.

The BTO flats are also in non-mature estates and not very attractive locations, they said.

First-timer Ms Siti Hajaar, 26, expected little competition when she and her husband applied for a five-room flat in Jurong West. But she did not expect there to be more such units than buyers, as was the case last night: "Hopefully, the chances of us getting the flat are higher."

Meanwhile, there were under four applicants for each balance flat compared with eight per flat in the previous launch in May.

R'ST Research director Ong Kah Seng said this showed "quite keen interest" in balance flats, but this could cool further as resale prices fall.

Median COV for flats drops to $8,000
By Janice Heng, The Straits Times, 6 Dec 2013

CASH premiums for Housing Board flats have fallen further and faster than expected as housing curbs continue to bite.

The median cash-over-valuation (COV) dropped to $8,000 last month from $11,444 in October, ahead of predictions that it would hit $10,000 by the year end, according to Singapore Real Estate Exchange (SRX) flash estimates yesterday.

This might be due to more deals in less popular estates, rather than unexpectedly cool demand overall, said analysts.

"A lot of transactions were in places like Sengkang and Jurong West, where COVs are lower," said ERA Realty key executive officer Eugene Lim.

The fall was part of a weak housing market picture. Both public and private resale prices fell to the lowest levels this year. Transaction volumes dipped, reversing a slight rise in September.

Resale prices of non-landed private homes fell 1.5 per cent from October.

There were 387 non-landed homes resold last month, down from both October and the same time last year.

In public housing, the fall in median COV marked the first time since July 2009 that cash premiums fell below $10,000.

Analysts say it could slip to $5,000 in the next few months, on the back of more negative COV deals.

Last month, 13.1 per cent of resale deals closed below valuation, up from the SRX's estimate of 8.5 per cent in October.

"We are expecting COV to continue to moderate, especially during the festive period," said Mr Lim. But he does not expect it to hit zero, as flats in mature estates are still fetching reasonable premiums.

R'ST Research director Ong Kah Seng expects COVs to continue to dip until around the second quarter or middle of next year.

With more suburban condominiums being completed next year, "there is probably more competition by HDB upgraders to sell their flats from now (onwards)", he said.

Amid a buyer's market, HDB resale prices fell 0.6 per cent to the lowest level since September last year, and fewer flats changed hands. The estimated 1,051 transactions last month was down from October and 34 per cent less than the same time last year.

Though resale numbers are usually down in the festive season, analysts said last month's fall was due more to cooler buyer sentiment after loan curbs.

Completing the picture of weak demand was the rental market. Private non-landed rental prices remained flat, after three months of decline.

For HDB flats, median rents slipped 2.1 per cent to $2,350, the first drop since they reached $2,400 in June last year.

Smaller BTO supply 'won't affect resales'
Analysts say markets for new, resale flats serve different groups of buyers
By Janice Heng, The Straits Times, 4 Dec 2013

REDUCING the supply of Build-To-Order flats after a three-year construction boom makes sense given the reduced demand but resale prices are unlikely to be affected, say analysts.

This is because, now that pent-up BTO demand has been addressed, the two markets largely serve different groups.

"The profile of buyers going for resale flats and BTO flats is generally different," said R'ST Research director Ong Kah Seng yesterday:

Analysts were responding to remarks by National Development Minister Khaw Boon Wan, who said on Monday that the Housing Board's "massive construction programme" would start to be tapered off next year.

Mr Khaw noted that three years of BTO launches have begun to restore a balance in the supply and demand of public housing by clearing the backlog of first-time buyers, mainly young families.

Analysts such as OrangeTee head of research Christine Li agreed. "You can see that demand from first-timers is quite stabilised," she said.

BTO application rates for first-timers ranged from 0.7 to 2 times this year, down from a high of 5.3 in 2010.

Mr Khaw also pointed to falling cash-over-valuation figures in the resale market as a welcome sign of balance being restored.

The past three years of higher BTO supply meant first-time buyers could get a new flat rather than turning to the resale market.

This factor in conjunction with cooling measures like stricter home loan rules helped alleviate demand for resale units. Resale prices and cash premiums have fallen in response.

But analysts doubt the tapering will drive buyers back to the resale market.

In the first place, this tapering is in response to reduced buyer demand, noted Mr Ong. Excess demand, dating from a time of a severe shortage of affordable flats, has been satisfied.

Nor are resale sellers likely to raise their prices, since buyers' ability to afford pricey flats has been curbed by new loan rules.

If supply falls so much that it seems difficult to get a BTO unit, some demand might return to the resale market, said Mr Chris Koh, director of property consultancy Chris International, but he does not expect this to happen.

He is sticking to his forecast that resale prices will fall 5 to 10 per cent next year.

Spike in number of flats sold below valuation
By Rachel Au-Yong, The Straits Times, 2 Dec 2013

THE number of Housing Board flats being sold below valuation has rocketed, as tighter mortgage rules eat into demand.

According to HDB's latest figures, 105 units were sold in October for less than their appraisal. This accounted for 7 per cent of the total resale volume, a marked increase on the average 0.3 per cent for each month of the first half of the year.

This means around four times as many flats were sold below valuation in October alone than over the whole of January to June, when there was an average of five such transactions every month.

This has forced sellers, such as assistant manager Raymond Koh, 37, to adjust expectations.

After asking for a cash-over- valuation (COV) of $20,000 for his $526,000 five-roomer in Punggol earlier this year and finding no buyers, he cut his price. "I lowered my COV to $10,000, then $5,000, then zero," he said. "Then I started going negative."

Today, his second-floor, nine-year-old flat is on sale for $20,000 below valuation.

The lower mortgage servicing ratio, shorter loan tenure and three-year wait before new permanent residents can buy public flats - announced in quick succession since August - have cooled interest. Median COV, the cash amount which buyers typically pay on top of valuation of a resale unit, fell from $35,000 in January to $12,000 in October.

Some sellers are no longer asking for COVs, and some are pricing flats even below valuation. OrangeTee research head Christine Li thinks the main COV killer is the stricter mortgage rules.

In August, the Housing Board announced that resale buyers can use up to only 30 per cent of their gross monthly income to repay loans with HDB, down from 35 per cent. This is in line with the mortgage servicing ratio announced in January for loans from private banks.

"Because buyers, especially young couples, can now take out only smaller loans, the additional portion has to be fronted by cash, which eats into their ability to pay COVs," she said.

Some flats will be hit worse than others, said analysts.

In Punggol and Sengkang, or larger estates in outlying areas such as Choa Chu Kang, the ramping up of new Build-To-Order flats has come at the same time as owners of neighbouring blocks being allowed to sell after a typical five-year minimum occupation period, said PropNex chief executive Mohamed Ismail.

"And if you live on the second floor, facing the rubbish chute - it's a triple whammy," he said. "Your COV will, of course, fall."

Owners such as divorcing couples or those who have purchased a new flat may have little choice but to sell.

Mr Koh has not bought a flat yet, but wants to upgrade to an executive apartment or a condominium in Sengkang, near the school of his choice for his five-year-old son. But he is adamant that $20,000 below valuation is as low as he is willing to go. "Any lower and I might as well continue living here."

No comments:

Post a Comment