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Jan 4, 2011
Resale flat price rises are stabilising

4th quarter gain of 2.4% shows cooling measures have some impact
By Jessica Cheam, Housing Correspondent

The relentless pace of rising Housing Board (HDB) resale flat prices over the past year or so has finally met some resistance as prices rise at a slower rate.

Advance estimates released by the HDB yesterday showed that for the three months ended Dec 31, resale flat prices rose 2.4 per cent compared with the previous third quarter of 2010.

In the third quarter, resale prices had risen at a markedly faster pace of 4 per cent from the second quarter of 2010.

The latest data brings the total rise in HDB resale flat prices for 2010 to about 13.3 per cent - a fresh record for prices.

However, the 2.4 per cent fourth quarter gain is the smallest quarterly rise since the second quarter of 2009.

The highest growth rate posted in a calendar year was in 2007 when resale flat prices shot up by 16.6 per cent.

Moderating price growth was also seen in the private market, where home prices rose 2.7 per cent in the fourth quarter, down from 2.9 per cent in the third - the slowest pace of growth since mid-2009.

Analysts said yesterday the figures - which show prices rising but stabilising - had been expected since the introduction of measures to discourage property speculation last August by the Government to cool the red hot market.

Data obtained from property agencies by The Straits Times recently had pointed to continuing median resale price rises, mainly because resale flat valuations are still playing catch-up, say analysts.

This was despite drops in a key indicator of market interest, cash over valuation (COV), the amount a buyer pays above the valuation of an HDB resale flat.

The HDB said the median COV paid in the fourth quarter had fallen 23 per cent to $23,000 from the third quarter.

Sales volumes have also eased, with the estimated number of flats changing hands dropping 21 per cent to 6,482 in the fourth quarter from the third.

ERA Asia-Pacific associate director Eugene Lim said prices are still going north as resale flat valuations, based on past sale prices, are still going up. 'In the future months, we'll see very hard bargaining on COV between buyers and sellers.'

Mr Lim expects COV to continue to decline to about $15,000 to $20,000 in the months ahead.

Already, property agency PropNex said based on its December sales, median COV was $20,000, while median HDB resale flat prices rose 1.5 to 3 per cent. Its chief executive Mohamed Ismail predicted the HDB resale price index will grow about 2 per cent per quarter this year.

This 'gentler growth' will be supported by a supply of new HDB flats, which will give buyers more choices, he said.

The HDB yesterday reiterated its plans to offer up to 22,000 new flats for 2011.

However, some analysts said it 'remains to be seen' whether prices will stabilise or surpass the 2.4 per cent level next quarter on the back of positive market sentiment and a recovering economy.

Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, noted that the latest figures were of the first full quarter to date since the cooling measures. 'The measures had a big psychological impact. We need another quarter of statistics to see if this impact is sustained, or whether the market exuberance will return,' he said.

The fundamental issue is the supply of resale flats, which has shrunk as sellers take their flats off the market. This may prop up resale prices, he added.

But for home buyers such as Charan Jaipragas, 26, a civil servant, the current market with declining COVs has presented him with a buying opportunity.

He bought a maisonette at Taman Jurong last week for $495,000, including $5,000 COV. He felt the flat was expensive, but as COV was low, he could afford it. He is also getting married soon and could not wait for a new flat, which typically takes three years to be built.

'Even though the price was high, my CPF could support it. And the cash upfront needed was low, so I went ahead. I would rather buy now than risk valuations rising further in the year ahead,' he added.