HDB resale flats still hot picks in 3Q10

The HDB resale price index (RPI) inched up a further 4.0% to yet another new high of 167.8 in 3Q despite the cooling measures announced by MND and HDB on 30 August.

In a statement, PropNex CEO Mohamed Ismail said, “This increase could be attributed to median Cash-Over-Valuation (COV) levels continuing to inch upward quarter-on-quarter (Q-on-Q)."

Ismail emphasized that despite the overall median COV remaining at $30,000 Q-on-Q, closer examination of the figures revealed that median COVs for individual flat types, rose by about $2,000 to $3,000 across 3-room, 4-room, 5-room and executive flats.

“Although these numbers translate to individual flat types’ COVs rising by between 6–10% Q-on-Q, the increase is clearly lower than it has been 2Q09. This shows that the cooling measures announced on 30 August 2010 are having an impact, despite only one month being affected in 3Q09 itself,” Ismail said.

The new measures, mainly the lower Loan-To-Value ratio and higher Minimum Cash Payment, also saw a drop in September’s transactions dragging the overall quarter’s total transaction down to 8,205, a 10% drop from 2Q10.
However, Ismail cautioned that these numbers are largely based on July and August figures, which is before the new cooling measures were announced by HDB, and it cannot thus be concluded from HDB’s 3Q10 results that the cooling measures were ineffective.

“The full impact of those measures has yet to be clearly seen,” Ismail said, adding, “We will likely have a better picture from the 4Q10 results. In the meantime, we have seen COV levels for PropNex transaction drop between 6 and 32% in the first three weeks of October, as compared to the 3Q10 results.”

Median COV levels for PropNex transactions in the first three weeks of October recorded $19,000 for 3-room, $25,000 for 4-room, $30,000 for 5-room and $35,000 for executive flats. The median COV was $25,000, which is 16% lower than HDB’s median COV for 3Q10.

“This is the effect of the cooling measures, which will be more evident in 4Q10, when the market has better recovered from the initial impact of the measures’ announcement and genuine buyers will have continued with their purchases,” Ismail said.