HDB’s resale price index (RPI) continues to climb ever higher, posting a record 145.2 for 3Q09, a growth of 3.6% over the previous quarter.
“This is evidently the result of the greater demand for resale flats in recent months,” explains PropNex CEO Mohamed Ismail, referring also to the 11,649 resale transactions posted for 3Q09, up 14.9% from 2Q09. “Not only has there been a significant increase in the number of transactions,” he says, “but cash-over-valuation (COV) has also spiked across all flat types, with an overall median COV for 3Q09 of $12,000, which is a whopping 300% more than 2Q09’s $3,000. In fact, 79% of the flats transacted above valuation, much higher than the 57% in 2Q09.”
Mr Ismail also highlights an interesting facet of the figures. Where 2Q09 saw $0 median COV for many larger flats in almost all townships, many 3Q09 median COVs for larger flats hit five figures, reaching up to $20,000 for 5-room flats in Marine Parade and Yishun. “The take-up rate for the larger flats (5-room and Executive) has been steadily increasing in 2009,” points out Mr Ismail. “From 29.1% of all transactions in 1Q09, to 34.0% in 2Q09 and hitting 38.5% in 3Q09. Conversely, the take-up rate for the smaller flats (3- and 4-room) has been steadily declining, from 69.8% in 1Q09, to 65.3% in 2Q09 and finally to 60.8% in 3Q09. This increasing popularity for larger flats reflects a greater market confidence.”
He also supports this statement by noting that the total number of resale transactions in the first three quarters of 2009 is 28,279 so far, just 140 shy of the total for 2008. “Just a little under 12,000 transactions more and we would cross the 40,000 transactions mark,” he says.
However, Mr Ismail maintains that only growth increases of about 2–3% are sustainable, and does not expect to see any notable variation in this for the next few quarters.
And while these 3Q09 figures may fuel the fire of those who bemoan high COVs, Mr Ismail says that these results are actually good news for existing HDB owners. “This is a prime opportunity for them to upgrade their property or simply to gain cash from selling their existing flat. This is especially so for owners who bought their current flat during the previous peak in 1996, when the RPI was at 136.9, as their property assets would now be able to see positive cash flow.”
For newly married couples who are looking to buy a flat, Mr Ismail recommends that they seriously consider the 4,000 BTO flats that the Government has announced will be released in November and December 2009.
