The HDB Resale Price Index (RPI) increased by 4.2% over the previous quarter to 137.5. Although lower than the previous quarter’s increase of 4.5%, it reflects the continued strong demand for public housing in the resale market, especially during this financial downturn.
“One cause for this slight dip in the RPI,” says PropNex CEO Mohd Ismail, “can be traced to the overall drop in Median Cash-Over-Valuation (COV). For the last three quarters, we have seen the price drop from $21k, to $20k, to the current overall median COV of $19k.”
“It is interesting to note,” points out Mohd Ismail, “that the bigger drops in median COV were for 5-room flats (-15%) and executive flats (-22%). This is evidence of buyers resisting paying out larger COVs for larger properties in this bleak economy.”
This trend of increasing popularity for the smaller (3- and 4-room) flats was also reflected in the median resale prices, where the percentage increase for the smaller flats at almost 5% outstripped the 1.5% increase for the larger flats.
“Buyers are definitely being more cautious when it comes to buying larger flats,” says Mohd Ismail, referring also to the fact that the executive flat category was the only one that saw a drop in the number of resale flat applications quarter-on-quarter. (The 1- and 2-room flat categories are not included as the numbers available are too small.)
One positive and noteworthy observation is that 137.4 is now the highest mark reached by the RPI since the last quarter of 1996, which saw an RPI of 136.9.
“With an increase of about 12.4% for the first three quarters, the overall public housing price increase will now probably be in the region of 15% for the whole year,” adds Mohd Ismail, revising his earlier expectations of a 13% overall price increase for 2008.
“In fact, we can even expect to see this strong demand continuing into 2009, mainly because of the time lag to develop the BTO (Build-To-Order) and DBSS (Design, Build and Sell Scheme) flats, coupled with stronger demands from PRs due to higher rental costs.”
On the private secondary market scene however, the 2.4% decrease over the last quarter to 173.3 marks the first drop in the property price index (PPI) since the first quarter of 2004.
“The private property market has been hit hard in the last two quarters,” says Mohd Ismail. “with the oil crisis, higher inflation and the Lehman Brothers. These figures paint an accurate picture of waning market confidence across the board,” he says, “with even the Outside Central Region (OCR) taking a 1.5% dip.”
Ismail expects the OCR to be more resilient to the economic turmoil than the Core and Rest of Central Regions. This is because there would be a greater number of mass market upgraders willing to pick up well-priced (below $1,000psf) units than speculative buyers and high-end property buyers, even in these times.
He reiterates, though, that now is an opportunistic time for serious buyers with a long-term view for property investments.
