Looming supply woes to add more pressure on HDB resale prices

Prices to drop by 12-15%.

According to PropNex, over the next three years, 80,000 new BTO flats will be completed and keys handed over to buyers. HDB will also launch a total of 24,300 BTO flats in 2014 – this is just slightly lower than last year's supply of 25,100 units.

And according to Minister Khaw, 18,000 households in the next 3 years will be moving to a BTO flat, thus they are required to sell off their existing flat within the 6 months. With the forthcoming supply of HDB resale units in the market, it is expected to further create a downward pressure for HDB resale prices. In the next 2 years, we are expecting HDB resale prices may well drop by 12 to 15 percent," Mr Mohamed Ismail, CEO of PropNex Realty.

Resale prices for HDB flats continued their decline in the first quarter of 2014, a trend which is unlikely to reverse even by the end of this year — this is the result of a convergence of measures imposed last year to cool the market and a continued supply of new flats. HDB today indicated that the resale price index in 1Q14 was 198.5, which represented a 1.6 percent contraction from the previous quarter.

This continued decline comes after a 6.6 percent price growth in 2012 and a double-digit growth in 2011. It also marked three consecutive quarters of price decreases from 2013 (the index dipped 0.9 percent in 3Q13 and 1.5 percent in 4Q13). 

Mr Ismail said, “The potent combination of the measures has been effective at slowing down the price growth of HDB resale prices. I am not surprised that the downward trend to continue with prices dropping by between 6 to 8 percent in 2014 and beyond,” commented Mr Ismail.

“The recent HDB’s change to the valuation procedure will also create a cautious approach from buyers, and I foresee them being more careful when giving an offer for a particular flat. This will further increase a downward pressure on resale prices in the coming quarters.”