IT appears that home buyers are starting to chuck the old for the new, on the back of the government's bumper rollout of new flats across Singapore.
The number of applications for resale flats fell 0.5 per cent quarter-on-quarter to 5,892 in Q1, with the bulk of the decline arising from weaker interest for larger type units, such as five-room and executive flats.
Noteworthy, too, was a marked slowdown in price increases in the resale segment during the first three months of the year, as reflected by the Housing & Development Board's (HDB) Resale Price Index (RPI), which rose 0.6 per cent in the first quarter from Q4 2011. This compares to a 1.7 per cent increase during the period before.
Said Eugene Lim, key executive officer of ERA Realty Network: "Prices have hit a ceiling, and home buyers are attracted by HDB's continued BTO (build-to-order) launches of an array of flats in a variety of locations. The recent change of policy to cater for 15 per cent of the BTO flats in non-mature estates for second-timers have also drawn more home buyers towards this segment as shown in the quarter's lower overall resale transaction volume."
As industry watchers had anticipated, the median cash-over-valuation (COV) for resale flats has started to head southwards after reaching a peak last year.
Said Lee Sze Teck, senior manager of DWG's research and consultancy arm: "Our data showed that after peaking in Q3 2011, the COV asked by sellers continued to ease in Q1 2012 as the bargaining chips tilted more in favour of buyers. In particular, the pace of decline in COV accelerated in Q1 2012 to 22.9 per cent from 7.9 per cent in Q4 2011, with three-room, five-room and executive flats seeing the biggest drops of 22.2 per cent, 22.1 per cent and 18.5 per cent, respectively."
Explaining the steeper falls in COV in those segments, Mr Lee said that buyers of three-room flats (who usually have a lower income than buyers of larger flats) can now opt for a new BTO flat which is more affordable, while those who previously intended to buy a five-room or executive flat now have the option of purchasing an executive condominium (EC) following the recent revision in income ceiling.
Though industry consultants believe that COVs for resale flats will continue to ease in the coming year, they do not think that it will decline dramatically.
Said PropNex CEO Mohamed Ismail: "It is not likely that the COVs will drop significantly, given that the economy is doing well and demand for resale flats remains strong. We expect COVs to continue to remain within the range of $20,000 to $30,000 with flats situated close to amenities potentially commanding higher COVs."
Going forward, consultants expect overall buying sentiment in the HDB resale market to remain fairly moderate.
"The bulk of demand for HDB resale flats will come from those who indeed do not qualify for a BTO flat; buyers who indeed have urgent needs for accommodation; and one who may still choose a resale flat over a smaller private property for practical reasons like spatial concerns or the possibility to rent out spare rooms to defray overall financing costs," pointed out Ong Kah Seng, director of R'ST Research, who expects fairly flat HDB resale transacted prices ahead.
In the first quarter, HDB dished out 8,076 new flats under BTO exercises and another 3,825 under a sale of balance flats exercise, with more to come.