Tuesday 18 November 2014

New HDB flats more affordable now

Prices relative to applicants' incomes have fallen
By Janice Heng, The Straits Times, 17 Nov 2014

NEW Housing Board flats have become more affordable relative to applicants' household incomes, compared with last year.

But while the gap is closing, National Development Minister Khaw Boon Wan's target of having new flats priced at about four times the applicants' median income has not been reached.

When Mr Khaw set that target last year, the price ratio was about 5.5 times annual salary. Now it is lower for all flat sizes.

A new two-room flat is the most affordable. At $55,000 after grants, it is less than three times the median household salary of such applicants.

After grants, three-room flats cost 4.57 years of salary. Four- and five-roomers are less accessible, at 5.26 times and 5.36 times applicants' salaries respectively.

These calculations are based on average Build-To-Order (BTO) flat prices in non-mature estates, given by the Ministry of National Development in a September parliamentary reply, and applicants' median income as given in the September BTO.

High BTO prices caused unhappiness around the last general election in 2011. At the time, they were linked to HDB resale prices, which had been soaring.

After the elections, delinking BTO prices from the resale market stopped them from rising, as Mr Khaw noted during last year's Committee of Supply debate.

"We can now pause and see what else we can do to bring BTO prices in non-mature estates to, say, around four years of salary as it was before the current property cycle started," he said then.

Though the relative prices of BTO flats have fallen since Mr Khaw's speech, most of the flats still cost more than four years of an applicant's salary.

But experts pointed out that the picture improves if overall household incomes are considered, not just those of applicants.

Last year, the overall median household income was $7,030 a month.

The price of the median house type - a BTO four-roomer - was $295,000, or about 3.5 years of income, noted Singapore Management University economist Phang Sock Yong.

For resident employed households, which mainly exclude retirees, the median income was even higher, at $7,872 a month.

Using this as a reference, the price of $386,000 for a five-room flat "looks reasonable" at about four times one's annual salary, said National University of Singapore associate professor of real estate Sing Tien Foo.

NUS economist Tilak Abeysinghe prefers to compare house prices with lifetime income, with a price under 30 per cent considered affordable in the long run.

"A crude comparison indicates that a house price four times the annual income falls in the highly affordable range," he said.

Even the five-roomer, at 5.36 times the annual income, falls within the affordable range for that income group, he added.

Nor should we expect all flat types to be equally affordable by this ratio, said experts.

Larger flats cost more times one's income because public housing is priced "according to ability to pay", said Prof Phang.

Housing affordability is not just about setting prices, but encouraging a match between house type and household income level, said Prof Sing.

"Lowering housing prices for larger flats is not a good strategy or policy... it may induce some lower-income households to buy large houses, which could further distort the housing price to income ratio," he said.





6 months to sell a condo, 3 to offload a flat
By Rennie Whang, The Straits Times, 19 Nov 2014

PRIVATE condominium sellers are taking nearly six months to secure a sale, the longest wait in over two years, new data shows.

It also takes far longer now to find a buyer for a Housing Board flat - with a three-month wait on average.

Data compiled by the Singapore Real Estate Exchange (SRX) shows that private non-landed units spent a median of 120 days on the market in the first quarter, rising to 137 days in the second quarter and 154 days in the third.

Last month, they spent 172 days - almost six months - on the market before being sold. It is a far cry from 88.5 days, or less than three months, a year back.

The median wait to sell HDB units has grown as well, from more than 60 days per quarter in 2012 and last year to 91 days in the third quarter this year.

These long waits reflect weakened demand, consultants say. Upcoming increases in total residential stock will further pressure owners to sell, said Century 21 chief executive Ku Swee Yong.

In the HDB market, resale demand has suffered owing to factors such as the large number of new Build-To-Order flats, giving first- and second-time buyers a more affordable option, said PropNex CEO Mohd Ismail.

There has also been growing supply in the HDB resale market from people collecting keys to second homes, leading to sliding prices in the past five quarters.

For private homes, the total debt servicing ratio and additional buyer's stamp duty have discouraged buyers.

New private home sales are not expected to exceed 9,000 this year, far lower than last year's 17,590 annual sales figure.

The median price spread - the difference between asking and transaction prices - has also risen in both public and private residential markets, SRX found.

In the HDB market, the median price spread rose from 4.7 per cent in the first quarter to 4.9 per cent in the second and 5.9 per cent in the third. It was 3.8 per cent in the third quarter last year and 2.1 per cent a year earlier.

For private non-landed properties, the spread went from 6.3 per cent in the first quarter to 7.3 per cent in the second and 8.2 per cent in the third. It was 4.9 per cent in the third quarter last year and 4.1 per cent a year earlier.

While median days on market is expected to rise, price spreads may keep edging up though they are likely to stabilise soon, said OrangeTee research manager Wong Xian Yang. Valuations could be adjusted and sellers are likely to lower asking prices.

Private condo owners tend to have more holding power, but weak leasing demand for newly completed mass market condos may pressure some owners to sell, said R'ST Research director Ong Kah Seng.

The longer waits and growing price spread do not necessarily mean prices will soften further, said Savills Singapore research head Alan Cheong.

"Usually, (this could be the case) for more liquid markets like equities... Fortunately, real estate is not a homogeneous product with factors including location and unit size... all having an effect on pricing. Still, with a negative economic indicator such as increased days on market, creditors may feel compelled to quickly act against delinquent loans."





Vacancy rate of private homes ‘may hit 10%’
By Lee Yen Nee, TODAY, 27 Nov 2014

The vacancy rate of private homes in Singapore could be as high as 10 per cent over the next few years due to a surge in the number of completed units and this will pile further pressure on the residential market, the president of the Real Estate Developers’ Association of Singapore (REDAS) said yesterday.

Mr Chia Boon Kuah, who was speaking at the association’s 55th anniversary dinner, estimated that there will be about 68,000 newly completed units in the next few years.

“The industry is expecting unabated headwinds as the slew of cooling measures continue to bite and dampen buying sentiment ... (Rising vacancies) will add even more pressure on the residential market,” he said.

Data from the Urban Redevelopment Authority (URA) showed that the vacancy rate of private homes was 7 per cent at the end of the third quarter this year. It forecast the number of completed homes in 2015 to 2016 to exceed 20,000 units each year before falling to around 15,000 units in 2017.

Mr Chia also said sales of new private homes are expected to be less than 9,000 units for the whole of this year, down sharply from around 18,000 units last year. Coupled with the incoming supply, the property market faces “significant challenges”, which could have wider implications on the economy.

“It is in no one’s interest to witness unintended outcomes. We, therefore, urge the government to stand ready to take supportive measures to prevent a tipping point should the market turn volatile and worsen further,” he said.

Private home prices in Singapore fell 0.7 per cent between July and September for a fourth consecutive quarter of decline, narrowing from the 1 per cent decline in the previous quarter, URA data showed.


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