Not low enough: Declining HDB resale prices still too high for homebuyers

Prospective purchasers crippled by loan caps.

Bigger flats remain an elusive dream for many homebuyers, and some Singaporeans will simply have to make do with small houses.

According to PropNex, even though HDB resale prices entered its third consecutive quarter of decline in 2Q14, smaller loans will keep buyers from snapping up resale flats.

“But primarily, the main reason behind the slowdown in market activity is attributed to the income cap on how much buyers can borrow to pay off their mortgage. With smaller loans, some buyers can no longer afford to upgrade to larger flats,” PropNex reported.

Here’s more from PropNex:

The HDB resale market continued to cool in 2Q 2014, this is also the fourth consecutive quarter of price drop, according to flash figures released by HDB today.

The various measures, including loan curbs and the strong supply of new flats, continue to weigh down on demand, which brought about the sustained price decline.

The falling resale prices can be due to various government’s measures to cool 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. Thus, these measures work in tandem to reduce the resale demand.

In the resale market, homebuyers’ remained averse to properties with a large quantum. With their persistent price sensitivity and the reduction in their purchase budget under the strict TDSR framework, prices of homes in all regions registered decreases.