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First annual dip in HDB resale prices in 8 years

The Resale Price Index (RPI) for HDB flats for the full year of 2013 has dropped 0.6 per cent, the first annual decline since 2005.

SINGAPORE: Prices of HDB resale flats dipped by 0.6 per cent last year, marking the first annual fall since 2005.

According to data released by the Housing and Development Board (HDB) on Friday, the volume of resale transactions also reached a record low last year.

The HDB started recording such statistics in 1997.

The decline is down from the 6.6 per cent price growth seen in 2012, and the double-digit growth in the two years before that.

It also marked two consecutive quarters of price decreases in 2013, with prices falling 1.5 per cent in Q4.

This is slightly higher than the flash estimates released by the HDB earlier in the month.

For 2014, some property analysts think prices will remain flat, while others said prices could decline by four to eight per cent.

Nicholas Mak, executive director for research & consultancy at SLP International Property Consultants, said: "HDB resale prices have actually enjoyed quite a good run in the last four to five years. In fact, it's one of the price trends that actually defied the sub-prime crisis -- it's continued to increase.

“At such a high pace, there's actually quite a bit of room for prices to correct, if the market were to hit some kind of crisis. But luckily we're not facing any recession or crisis in the face, but due to the strong supply of BTO (Build-to-Order) flats that's expected to be offered in 2014, HDB prices are quite likely to come under pressure."

HDB resale transaction volume has also reached a record low.

Just 18,100 units were transacted last year -- a 28 per cent drop compared to 25,094 units which changed hands in 2012.

Colin Tan, director and head of research & consultancy at Suntec Real Estate Consultants, said this could be due to several factors such as the supply of flats eligible for sale and cooling measures.

He elaborated: "The low supply of maturing five-year flats -- I think, in the past decade we've built an average of six thousand (flats per year), compared with the previous two decades we were completing about 20,000 units per year. So this means the supply of resale flats has come down by more than half.

“The cooling measures bar you after you sell your flat, it's difficult to re-enter. So for the majority, if they can afford to keep their HDB flat they will do so. After all, if you've been looking at the median rentals, they're still pretty resilient,quite decent rental amount. So that has further reduced the amount of supply."

Another factor is the new rule barring new permanent residents from buying an HDB resale flat for three years, so some analysts said transaction levels could remain the same in 2014.

And some observers believe such low transaction levels may result in pent-up demand among upgraders going forward.

Some property analysts said another reason for the low transaction volume is that the demand has been shifted away from the HDB resale market.

For example, they said families may be drawn to cheaper Build-to-Order flats, while singles are now also able to buy a flat directly from the HDB.

Cash-Over-Valuation (COV) has also fallen across the board.

For instance, a four-room flat in Punggol would have commanded a COV of S$45,000 in the fourth quarter of 2012.

But in the fourth quarter of 2013, the COV has dropped to zero.

As for the HDB rental market, subletting transactions fell by three per cent in the fourth quarter of last year.

This is from 7,505 cases in the third quarter to 7,268 cases in the fourth.

However, the total number of HDB flats approved for subletting rose by 1.6 per cent in the last three months of 2013.

There were 44,966 units approved in the third quarter, compared with 45,764 in the fourth. 

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