What you need to know about the sharpest rocketing of resale price index in 2012

The 2% rise is actually surprising.

According to PropNex Realty, HDB resale price index (RPI) continued its upward momentum by inching up 2% in Q3 to reach 197.9 points, which is a new record high – rising more quickly than the 1.3% gain in Q2, according to the latest data released by HDB today.

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This also represents the sharpest rate of increase for 2012 so far. Chief Executive Officer of PropNex Realty, Mr Mohamed Ismail, said “The 2% increase in the resale price index came as a bit of a surprise, in the wake of a greater oncoming supply of BTO flats since last year and the moderation of HDB resale prices in the first two quarters of this year.

The possible reason for the growth is that the demand is still strong for public housing, and that the supply of BTO flats takes a few years to be ready for move-in.

Thus, the demand for resale flats is mainly by those who prefer not to wait. Moreover, there is also continued strong demand from buyers who are ineligible for BTO flats such as permanent residents, singles, second-time buyers such as private property down graders and existing HDB lateral down graders or upgraders who require housing immediately and are unable to wait for BTO units to be built”.

“We have also witnessed a tight supply in the HDB resale flat market as many potential sellers decide to stay put in their current HDB property as prices have reached its peak in the HDB resale market as well as the private property secondary market (he cites the 0.5% rise in the URA Private Property Price Index in Q3).

Due to the widening price gap between HDB resale flats and private properties, prospective buyers who were eyeing private properties could also be put off by the inflated prices, and enter the HDB resale market instead”, explained Mr Mohamed Ismail.

“Despite the rise in HDB resale prices, we believe that the HDB RPI is slowly heading towards stabilisation as it has increased by only 3.9% in 2012 so far, compared to a much steeper growth of 8.5% at the same time last year”.