HDB resale prices drop for the first time in over 4 years

It slipped by 0.9% in 3Q.

According to PropNex, Resale Housing Board (HDB) flat prices have slipped for the first time in more than 4 years.

According to HDB's 3Q2013 results released today, the resale price index dropped by 0.9%—the first time that the index declined since 1Q 2009 (when the index declined by 0.8%). 

“Overall, HDB resale price growth for the entire 2013 is expected to be less than 1% to possibly a negative growth. Moving into 2014, the HDB resale market can expect further negative price growth possibly at the range of negative 3 – 5%.

This price trend is due to the release of new BTO flats and PRs having to fulfil 3 year requirement before they can purchase a resale flat.

The HDB resale market is effectively serving only upgraders and limited permanent residents now, resulting in the weakening of prices and volume of transactions.

Transaction volume had dropped 27% comparing Y-o-Y and this is expected given the line-up of measures announced this year such as the TDSR, reduction of the MSR and the reduction of the maximum loan tenure, which have all impacted a buyers’ purchasing power.

The reduction of the mortgage servicing ratio (MSR) to 30% of a borrower’s gross monthly income has taken its full effect on resale prices – which saw the lowest increase since 2009, as affordability was hit.”

With the decreasing demand, Mr Ismail predicts that the volume of HDB resale transaction in 2013 to be in the range of 19,000, 24% lower compared to 2012, making this historical lowest volume of transaction in the resale market since the turn of the decade.

“The overall median COV (according to PropNex data) had dropped more than 45% to its current $17,000 in 3Q2013 compared to $32,000 at the beginning of 2013,” commented Mr Mohamed Ismail, CEO of PropNex Realty.