By Wong Siew Ying | POSTED: 02 Sep 2013 8:40 PM | UPDATED: 03 Sep 2013 12:19 AM | CNA


The policy changes announced by the Housing & Development Board (HDB) last week could bring about a drop in HDB’s resale price index as early as the fourth quarter this year, said analysts.

If so, it will be the index’s first quarterly drop in almost five years.

The new measures are also likely to have ripple effects on other segments of the property market.

On August 27, the HDB barred new permanent residents (PRs) from buying resale flats till three years after obtaining their PR status.

PRs account for about 20 per cent of transactions in the HDB resale market.

Analysts said the move will hurt transaction volume in the near term and expect HDB resale price growth to be largely flat in the third quarter, or a negative growth as early as the fourth quarter.

Eugene Lim, key executive officer for ERA, said: “More and more larger flats are now being sold at valuation, and some of them are even sold below valuation.

“Based on market data, the median is about S$20,000, down from S$35,000 at the beginning of the year (2013). When COV (Cash-Over-Valuation) comes down, resale prices will come down. All in all, that’s why… you may see a negative in the HDB resale price index (at year-end).”

OrangeTee projected HDB resale prices to inch up by no more than 0.5 per cent in Q3 and a marginal contraction in Q4.

Meanwhile, Propnex is more optimistic, expecting prices to climb by up to 1 per cent in Q3 and 0.5 per cent in Q4.

The rental market is expected to get a lift and analysts said some HDB owners have shelved plans to sell their flats, choosing instead to rent them out to new PRs.

ERA also expected the private home resale market to bounce back in the next six months, supported by demand from new PRs. But they are likely to favour units in the suburban areas that are priced between S$800,000 and S$1.5 million.

To encourage financial prudence, the government has also further tightened housing loan terms.

The maximum tenure for HDB housing loans has been reduced to 25 years from 30 years, while the Mortgage Servicing Ratio has been cut to 30 per cent from 35 per cent of the borrower’s monthly income.

Similar arrangements were also made for the tenure of new housing loans and re-financing facilities granted by financial institutions for the purchase of HDB flats.

New bank loans with tenures exceeding 25 years and up to 30 years will also be subjected to tighter loan-to-value (LTV) limits.

Some analysts believe these terms will drive demand for executive condominiums (EC).

Christine Li, Head of Research & Consultancy at OrangeTee, said: “A lot of buyers will actually go for new ECs in the market because they can get 30- to 35-year loan tenure as well as higher TDSR (total debt servicing ratio framework) — 60 per cent of their monthly income. From the investment point of view, the capital appreciation, ECs seem to have more potential upside.”

As the property market stabilises, there could be some downward pressure on land prices.

Mohamed Ismail, CEO of Propnex, said: “I don’t think we are going to witness new record prices in the upcoming land sites. Most of these upcoming sites are in the outlying areas.

“I think the developers will take into consideration the current sentiment; the prices could be muted or similar to the last couple of land bids or maybe marginally lower.

“But I am not expecting the land bids to… come down by 10 to 20 per cent.”

– CNA/gn