Cash-over-valuation for your HDB Flat? Think again

Cheow Xin Yi
cheowxinyi@mediacorp.com.sg

THE public housing market, which is known for its resilience, has finally peaked, according to flash estimates.

In its first decline in three years, the Housing and Development Board’s (HDB) Resale Price Index fell 0.6 per cent in the first quarter of the year, after rising 1.4 per cent in the previous quarter.

Most analysts Today spoke to said they saw this as a reflection of the general deterioration in the economic and employment climate. “We have seen private property prices coming down and this has had a spillover effect on HDB. Once cash-over-valuations (COV) come down, transacted
prices also become lower,” said Mr Chris Koh, Dennis Wee Group’s vice-president.

Another reason, suggested Mr Colin Tan, research director at property consultant Chesterton Suntec International, could be HDB’s pushing out more supply, making new flats more “reasonably priced” and driving down the demand for resale flats.

ERA’s Asia Pacific associate director Eugene Lim said larger flats, such as five-room units or those above $500,000, are taking longer to sell and coming in below valuation. “For larger flats, the days of transactions with COV are over,” he said.

The downtrend is good news for buyers, especially newly-weds, although ERA’sMr Lim said resale prices are not likely to plunge. He expects HDB resale prices to come down by 5 to 10 per cent for the whole year, while PropNex chief executive Mohamed Ismail had a more optimistic estimate of2 per cent.

Mr Lim added: “It has taken some time for (HDB prices) to move to a new peak. Similarly, the downtrend is reflective of the environment, but it will happen in trickles.”

Would a declining public market exacerbate the already shaky private sector, especially when recent transactions in the latter has depended on HDB upgraders?

“Theoretically, when people are getting less after selling their HBD flats, they’ll have less to splurge on private developments,” said Chesterton’s Mr Tan.

But Mr Koh from Dennis Wee Group feels that an HDB flat owner “would want to upgrade now in absolute terms”, as the savings from the purchase of a private property would be higher than the loss he would incur from selling his HDB flat, given the bigger drop in prices in the private market.

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