HDB resale price index in 2Q2018 up 0.1%

/ EdgeProp
July 2, 2018 7:40 PM SGT
HDB’s flash estimate for 2Q2018 has shown a 0.1% increase in resale prices of public housing flats. This is the first rise since 4Q2015, and an improvement from the six consecutive quarters of price decline. Despite the slight improvement from the price decline of 0.8% in 1Q2018, however, it is still a 1.5% drop compared to a year ago (2Q2017).
The marginal improvement in the HDB resale price index could be a sign that the index has bottomed, but this can only be confirmed after two consecutive quarters of increase, says Nicholas Mak, executive director of ZACD Group.
Previously, the decline in resale prices for six consecutive quarters was attributed partially to the strong supply of HDB Build-To-Order (BTO) flats. However, HDB has also announced a reduction in the number of BTO flats to be released this year from 17,000 to 16,000. With this, Mak reckons that HDB resale prices could be expected to stabilise further, and possibly inch up for the rest of 2018.
However, Mak notes that as the HDB resale price index has already contracted 1.5% year-on-year (yoy) as at 2Q2018, even if the price index were to recover in the second half of 2018, the change for the whole year could vary from -0.5% to +0.5% yoy at the most.
Recently the concern of depleting leases of older resale HDB flats has been in the spotlight. It may have the effect of decreasing the demand for and prices of resale flats, notes Eugene Lim, key executive officer at ERA Realty. This will, however, be changed with the launch of newer flats that are able to command a premium, with some boasting a resale price of above $1 million, he adds.

Incentives to purchase resale flats

Lim also attributes the attractiveness of resale flats to other factors.
A comparable private property in the same location as an HDB flat could cost about double the price. This could be one reason why some buyers are willing to fork out good money for HDB resale flats, he says.
Also, the government has increased the amount of grants given out to homebuyers, with the maximum amount of grants available now at $120,000 (up to $30,000 Proximity Housing Grant, up to $50,000 Family Grant, and up to $40,000 Additional Housing Grant). The new Resale Portal has also halved transaction processing time. With the new resale portal, buyers remain price-sensitive and would want to ensure that the price they have negotiated and agreed on with the seller is at a value that can be confirmed by HDB as the market value.
Next, the resale route also remains the only one for buyers to pick a flat in their desired location. For BTO flats, the location is dependent on HDB’s sale launches, and there is an element of chance involved in the buying process.
Furthermore, there is no income ceiling for buying resale flats, especially if no grants are taken, and if the buyer does not take an HDB loan.
Hence, resale flats are still expected to be popular among buyers, in particular those who are not eligible for new flats or those who have urgent housing needs, says ERA Realty’s Lim.