Resale flat prices keep going up

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#1
And the game of musical chairs continues....

The Straits Times
Oct 29, 2011
Resale flat prices keep going up

Strong demand and shrinking supply behind the price rise: Analysts

By Jessica Cheam

FEWER people bought Housing Board (HDB) resale flats between July and September this year, but they were prepared to pay more.

That sent resale flat prices rising 3.8 per cent to a new record in the third quarter.

It was the second consecutive quarter of accelerated resale price rises. Prices were up 3.1 per cent in the April-June quarter, and 1.6 per cent from January to March.

Analysts said the numbers reflect continued strong demand for a shrinking supply of resale flats.

The number of resale transactions declined by 10 per cent to 5,903 deals in the third quarter - below the usual 6,000-a-month average.

But sellers reaped handsome gains, given latest figures of what buyers paid in cash-over-valuation (COV) - the cash premium on top of the bank valuation for the property.

Figures released yesterday showed that the median COV has risen to more than $30,000 for almost all flat types and estates.

Analysts told The Straits Times that uncertainties in the global economy coupled with rules introduced last August to restrict HDB flat ownership had resulted in some owners deciding not to sell their flats.

The rules require private property owners who buy HDB resale flats to dispose of their private property within six months.

Another rule requires owners to prove they have sold their existing flat before qualifying for higher 80 per cent financing on their next home, making it more onerous for owners to upgrade their homes.

As a result, some flat owners have opted to rent out their flats or hold on to them - unless an irresistible offer comes along.

'Owners are treating their HDB flats as investments and prefer to keep them if they can. There are not enough resale flats in the market, so demand is driving prices up,' said Dennis Wee Group director Chris Koh.

Supply of resale flats likely to remain tight

On the other hand, noted ERA Realty key executive officer Eugene Lim, people with immediate housing needs are keeping demand for resale flats up - first- time home-buyers, singles, permanent residents (PRs) and families upgrading or downgrading.

While HDB's aggressive launch of new Build-To-Order (BTO) flats has absorbed some demand from the resale market, he said the wait for a new flat is still three years and 'many buyers cannot wait'.

Analysts add that recent moves to raise the monthly income ceiling for buyers of new HDB flats from $8,000 to $10,000 would also take some heat out of the market, but the effects would not yet have been felt in the third quarter.

Mr Colin Tan, research and consultancy director at Chesterton Suntec International, pointed out another factor - that there is a historically low supply of five-year-old flats eligible for resale.

HDB flats are typically eligible for resale only after a minimum of five years' occupation by their owners.

There are fewer such flats because HDB's building programme slowed dramatically about eight years ago due to the economic and Sars crises, as well as the availability of tens of thousands of unsold flats.

The current tight supply of resale flats is therefore likely to continue for some years until the bumper crop of BTO flats launched recently reaches the market, said Mr Tan.

The HDB also said yesterday that it will be launching another 4,200 BTO flats for sale next month in towns such as Bedok, Bukit Panjang, Hougang, Punggol and Yishun.

This will raise its total flat supply for this year to 28,000 homes.

jcheam@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
I wonder what the profiles of the 5,903 "cannot wait" buyers are like. Are they mostly upgraders/downgraders where they must buy to secure a roof?
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#3
(31-10-2011, 11:01 AM)egghead Wrote: I wonder what the profiles of the 5,903 "cannot wait" buyers are like. Are they mostly upgraders/downgraders where they must buy to secure a roof?

My personal view is that the word "afforable" has been so abused by the media that people take it to mean that as long as they can pay the installments through either CPF (or a combination of CPF and Cash), then it is deemed "affordable". Never mind the loan tenure or total interest accrued as a proportion of the purchase price! Tongue
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#4
(29-10-2011, 05:46 PM)Musicwhiz Wrote: And the game of musical chairs continues....

The Straits Times
Oct 29, 2011
Resale flat prices keep going up

Strong demand and shrinking supply behind the price rise: Analysts

By Jessica Cheam

FEWER people bought Housing Board (HDB) resale flats between July and September this year, but they were prepared to pay more.

FEWER people are able to afford Housing Board (HDB) resale flats between July and September this year due to record high prices.

That sent resale flat prices rising 3.8 per cent to a new record in the third quarter.

It was the second consecutive quarter of accelerated resale price rises. Prices were up 3.1 per cent in the April-June quarter, and 1.6 per cent from January to March.

The resale flat prices rose at increasingly rapid pace, from 1.6 percent from January to March, another 3.1 percent from April to June, and a further 3.8 percent in the recent July to September quarter.

Analysts said the numbers reflect continued strong demand for a shrinking supply of resale flats.

Analysts said that the numbers reflect the decreasing affordability of resale flats.

The number of resale transactions declined by 10 per cent to 5,903 deals in the third quarter - below the usual 6,000-a-month average.

But sellers reaped handsome gains, given latest figures of what buyers paid in cash-over-valuation (COV) - the cash premium on top of the bank valuation for the property.

Figures released yesterday showed that the median COV has risen to more than $30,000 for almost all flat types and estates.

Analysts told The Straits Times that uncertainties in the global economy coupled with rules introduced last August to restrict HDB flat ownership had resulted in some owners deciding not to sell their flats.

The rules require private property owners who buy HDB resale flats to dispose of their private property within six months.

Another rule requires owners to prove they have sold their existing flat before qualifying for higher 80 per cent financing on their next home, making it more onerous for owners to upgrade their homes.

As a result, some flat owners have opted to rent out their flats or hold on to them - unless an irresistible offer comes along.

'Owners are treating their HDB flats as investments and prefer to keep them if they can. There are not enough resale flats in the market, so demand is driving prices up,' said Dennis Wee Group director Chris Koh.

Supply of resale flats likely to remain tight

On the other hand, noted ERA Realty key executive officer Eugene Lim, people with immediate housing needs are keeping demand for resale flats up - first- time home-buyers, singles, permanent residents (PRs) and families upgrading or downgrading.

While HDB's aggressive launch of new Build-To-Order (BTO) flats has absorbed some demand from the resale market, he said the wait for a new flat is still three years and 'many buyers cannot wait'.

Analysts add that recent moves to raise the monthly income ceiling for buyers of new HDB flats from $8,000 to $10,000 would also take some heat out of the market, but the effects would not yet have been felt in the third quarter.

Mr Colin Tan, research and consultancy director at Chesterton Suntec International, pointed out another factor - that there is a historically low supply of five-year-old flats eligible for resale.

HDB flats are typically eligible for resale only after a minimum of five years' occupation by their owners.

There are fewer such flats because HDB's building programme slowed dramatically about eight years ago due to the economic and Sars crises, as well as the availability of tens of thousands of unsold flats.

The current tight supply of resale flats is therefore likely to continue for some years until the bumper crop of BTO flats launched recently reaches the market, said Mr Tan.

The HDB also said yesterday that it will be launching another 4,200 BTO flats for sale next month in towns such as Bedok, Bukit Panjang, Hougang, Punggol and Yishun.

This will raise its total flat supply for this year to 28,000 homes.

jcheam@sph.com.sg

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#5
(31-10-2011, 11:04 AM)Musicwhiz Wrote: My personal view is that the word "afforable" has been so abused by the media that people take it to mean that as long as they can pay the installments through either CPF (or a combination of CPF and Cash), then it is deemed "affordable". Never mind the loan tenure or total interest accrued as a proportion of the purchase price! Tongue

As a matter of fact, Mahboro Tan was the one who abused it (if i did not remember wrongly) when he stated it very clearly in 1 of his replies during his famous 'raiding the reserves' debate with LTK, that housing is affordable by taking a 30yr HDB loan for newly wedded couples (who has a combined income of ~5K)

We should push MOE to make 'Rich Dad, Poor Dad' as compulsory reading material. Then everyone will know that a house which you are still paying off the loans, is essentially NOT an ASSET. it is a LIABILITY!

As a matter of fact, i would encourage everyone who is paying their house loans to use cash as much as possible (if they can afford it), rather than CPF. This is because, by using CPF, they are losing the potential 2.5-3.5% risk free compounded interest they could have accrued.
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#6
weijian,
it depends.

A lot of people (esp. the PRs) are ok with people living with them under one roof.
I would say the HDBs with the landlord (1 room), tenants(the other 2 rooms) to be more or less an asset.

As for why resale prices are high, I would say it's mainly due to the unaffordability of the private properties. This drives a lot of people(esp. PRs) to buy HDB(renting out 1 or two rooms). The PRs are smart people, they know they are getting to stay in a HDB rent-free while the HDB is paid for by his/her tenants.
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#7
(01-11-2011, 12:32 AM)weijian Wrote: As a matter of fact, i would encourage everyone who is paying their house loans to use cash as much as possible (if they can afford it), rather than CPF. This is because, by using CPF, they are losing the potential 2.5-3.5% risk free compounded interest they could have accrued.

Careful the CPF is not that stupid...if your Medisave has reached the limit of $40,500, then it NOT safe to transfer your cash to OA and enjoy 2.5%, risk free.....a friend of mine recently transfer cash into his OA but realised that a bulk of the cash kenna eaten into the medisave account, only that after Medisave ceiling is hit than the balance is only go into OA.
Take note, medisave money is not your money you have no chance to touch this money, it keep on passing down to your next generation medisave...

Another case, recently my retired relative passed 55 yrs old, sold his 5 room flat for 580k, wanted to return the proceed back to CPF account but the authority refused to allow him to put back into CPF being reason that he is over 55 yrs and had drawn out the cpf and not allowed to put back. However, he may put it in his retirement account if they has not reach the minimun sum limit...which is only $99,600 peanut...

HENCE, what im trying to tell u if u have $1 million i dun think CPF board allow u to put inside their board....
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#8
(01-11-2011, 12:32 AM)weijian Wrote: We should push MOE to make 'Rich Dad, Poor Dad' as compulsory reading material. Then everyone will know that a house which you are still paying off the loans, is essentially NOT an ASSET. it is a LIABILITY!

As a matter of fact, i would encourage everyone who is paying their house loans to use cash as much as possible (if they can afford it), rather than CPF. This is because, by using CPF, they are losing the potential 2.5-3.5% risk free compounded interest they could have accrued.
In rich dad poor dad definition of liability, a house even if fully paid is also considered a liability unless it can generate free cash flow to it's owner. He does not consider capital gain of the house as an asset.

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#9
Quote:We should push MOE to make 'Rich Dad, Poor Dad' as compulsory reading material. Then everyone will know that a house which you are still paying off the loans, is essentially NOT an ASSET. it is a LIABILITY!
We should not use a fiction as educational material for the students.
http://www.johntreed.com/Kiyosaki.html
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#10
Assets:
Yes! Every "free-hold" asset has liability too. There is no such thing as free of liability asset. Even the clothes you put on has liability. No, you cannot escape liability as long as you are alive. What about monks? Remember, monks also must wear clothes. Oh! Am i dementia already? Must see my doctor soon. Ha! Ha!
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.
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