First dip in resale flat prices since 2006

BUSINESS ANALYSIS

Prices of HDB resale flats fell 0.8 per cent in the first quarter compared with the previous quarter, marking the first decline since 2006.

This was slightly worse than the 0.6 -per-cent fall estimated by HDB earlier this month.

Price increases in resale flats have been moderating since the third quarter of last year. The median Cash-Over-Valuation amount for resale transactions dropped to $4,000 in the first quarter, a plunge of 73 per cent from the fourth quarter of last year.

The number of resale applications rose by 4 per cent to around 6,400. 938LIVE

From TODAY, Business – Weekend, 25/56-April-2009

2007 homebuyers at risk

BUSINESS ANALYSIS

Tay Huey Ying

THE islandwide property price index registered a decline of 14.1 per cent in the first quarter, slightly steeper than the flash estimate of 13.8 per cent.

This is the worst quarterly decline to date. It's also worse than the 13.1 per cent quarter-on-quarter drop recorded in the third quarter of 1998 when the residential market was adversely affected by the Asian financial crisis.

Private home prices have now fallen for the third consecutive quarter, with a total decline of 21.2 per cent since peaking in 2Q 2008.

Based on the URA's statistics, the private home property index is now almost back to 1Q 2007's level. Hence, purchasers who bought their properties after 1Q 2007 are at risk of having the valuation of their properties fall below their purchase price. For those who bought their properties on the deferred payment scheme and have yet to secure a loan, this would limit the loan-to-purchase price ratio that they can secure from financing institutions.

Nevertheless, anecdotal evidence has thus far shown that a majority of such buyers are able to cough up the amount of purchase price not supported by valuation in cash. This has helped to keep the number of distressed sales at a controllable level.

Moving forward, although private home prices are expected to remain depressed, the rate of decline is forecast to moderate from the high of 1Q 2009, as developers have already marked down prices substantially in the quarter. Mass-market homes could see more gradual price corrections averaging in the region of 8 to 12 per cent over the next three quarters, as more sellers in the secondary market and developers of unsold units from earlier launches could be expected to adjust their prices to near-current levels.

The mid-tier and high-end segments could witness larger average price declines ranging from 10 to 15 per cent over the same period.

The writer is director for research and advisory at Colliers International.

From TODAY, Business – Weekend, 25/56-April-2009

A freeze on rent will be unfair: Fu

THE Housing and Development Board will not freeze industrial and commercial rental increases made before the recession took root, but tenants who have renewed their leases since January have had their rent reduced by 5 per cent.

This approach, Senior Minister of State (National Development) Grace Fu said, ensures HDB rents are not “disconnected” from market realities.

In both instances, rents were adjusted to the market conditions at the time. Freezing earlier rental increases, as suggested by MP Lee Bee Wah (Ang Mo Kio), would then result in unfair outcomes for tenants, whose rents are fixed and reviewed every three years, said Ms Fu. “A freeze on rent increases is not equitable as it will result in different rental subsidies for different tenants who may have renewed their tenancies over different periods of time.”

Instead, the 15-per-cent rental rebate announced during the Budget was a better way of helping industrial and commercial tenants, she added. “For the small number of tenants who face substantial rental increases in spite of these measures, HDB will stagger the rent increases over the tenancy term.”

But HDB, which conducts regular reviews of market rents, will monitor the situation closely.

Meanwhile, the Government will also not step in to guarantee loans to property developers, National Development Minister Mah Bow Tan said in reply to another question by Ms Lee. Total loans to the building and construction sector, mostly to developers, grew by 22 per cent in the 12 months to February, and while loan growth to the sector has tapered recently, it is still at the relatively high level of $50 billion, said Mr Mah.

“Besides bank loans, a number of developers have also managed to raise capital through other means, such as rights issues or private placements,” he said.

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From TODAY, News - Tuesday, 14-April-2009