HDB resale prices might have finally hit bottom, says analyst

Prices declined at the slowest pace in eight quarters.

After declining for eight consecutive quarters, HDB resale prices might have finally bottomed out in Q3.

According to Ismail Gafoor, CEO of PropNex Realty, the 0.3% quarter-on-quarter decline in HDB resale prices represents the lowest rate of contraction in more than two years.

“The potent combination of the measures has been effective at slowing down the price growth of HDB resale prices. We continue to expect resale prices to fall for the next quarter of the year, but prices may have reached a bottoming-out level,” he said.

The sustained fall in resale prices is due to the combination of the government’s measures to stabilise the public housing market such as, reducing the Mortgage Servicing Ratio (MSR) cap of 30 per cent and the maximum loan term of 25 years for HDB mortgage loans, three-year wait for new PRs before they can buy resale HDB flats, and allowing singles to buy two-room BTO flats in non-mature estates.

He also credits the falling prices to the increased BTO supply. Over 90,000 BTO flats were launched between 2011 and 2014. And in 2015, HDB will launch about 20,000 new flats for sale – such huge supply would have further taken away demand from the resale market, thereby stabilizing prices. In addition, the Sale of Balance Flats programme has also offered a good number and variety of choices for first- and second-time buyers.

With a large influx of home completions starting from next year — along with the continued enforcement of government measures, Mr Ismail expects HDB resale prices to soften about 3 per cent for full-year 2015, with volume hitting around 19,000 to 20,000 units due to the lower asking prices.