SINGAPORE - Hot, robust and pulsating. Three words market watchers have used to describe the resale flat market this year, and it looks like they will be saying the same next year.
Resale prices for Housing & Development Board (HDB) homes could go up by between 3 and 8 per cent in 2013, and cash-over-valuations, or COVs, could rise 5 to 10 per cent, analysts told The Business Times.
They foresee sustained demand in the face of constrained supply and easy monetary conditions.
Nicholas Mak, executive director of research and consultancy at SLP International, likened the resale market to a big ship that requires a shock or simply more time to turn around. "Nothing short of government intervention or a softening economy would bring down prices," he said.
Ong Kah Seng, director at R'ST Research, said prices and COVs could fall 3 per cent in the event of new cooling measures.
Prices for resale units gained 3.9 per cent in the first nine months of the year, the HDB's latest statistics showed. That is down from 10.7 per cent last year and 14.1 per cent in 2010, but prices are still at a record high.
Full-year growth could clock in at between 5 and 7 per cent, the consultants said.
Meanwhile, COVs have resumed their ascent after stabilising in the first half of the year. The median for this cash premium is now $34,000, based on the Singapore Real Estate Exchange's latest report, $2,000 shy of the record set last year.
Lee Sze Teck, DWG's senior manager for training, research and consultancy, noted that even as the authorities took measures to divert demand from the resale market, an expected stabilisation in prices and COVs did not materialise fully in 2012.
A record number of more than 27,000 Built-to- Order (BTO) flats will be released this year, bringing the total to some 83,000 since 2009. The HDB also increased the allocation of BTO flats and executive condominiums (ECs) to second-time buyers in March.
SLP's Mr Mak believes that even if the government continues to release large numbers of BTO units, it could take another two to three years to chip away at the buoyant resale market.
Analysts are expecting between 22,000 and 27,000 BTO units for next year.
Ong Teck Hui, national director for research and consultancy at Jones Lang LaSalle, said the fundamental issue was "a structural undersupply".
Sales volume for pre-owned homes fell from over 32,000 in 2010 to about 25,000 in 2011 and around 19,000 in the first nine months of 2012, he said.
"The fresh supply of resale flats is quite low," said Eugene Lim, key executive officer at ERA Realty.
One reason is the policies introduced in 2010 that required owners of private homes to sell them off if they buy HDB units, and extended the Minimum Occupancy Period (MOP) from three to five years.
This has made upgraders reluctant to sell as it meant they could not buy an HDB flat in future.
Said R'ST's Mr Ong: "Many thus decide to continue to hold on to their flats, especially those in good locations that can easily be leased out."
Property measures introduced this year were a mixed bag.
Mr Ong said a restriction on loan tenures could have a chilling effect.
On the other hand, restrictions on the number of shoebox units in private residential developments could chase demand back to resale flats.
Low borrowing rates this year continued to spur interest from second-time buyers and permanent residents (PRs) for whom monthly instalments can be lower than rents.
Also, singles were looking at resale flats again, Mr Ong noted.
SLP's Mr Mak said that some buyers were bringing forward their purchases, worried that prices were still going to go up.
"That becomes a self-fulfilling prophecy, and that also can lead to over-reaction," he said. Analyst said that most of the same factors that contributed to the buzz this year will remain relevant next year.
The supply of resale flats will remain tight even as more BTO units roll out. A commitment to a new flat now means the unit is effectively eliminated from the market for eight years: assuming three years of construction followed by a five-year waiting period.
But there could be some relief as new flats and ECs released in 2010 near their completion. "The second-timers who buy a new flat or EC in 2010 are likely to collect their keys in 2013, adding to the available supply of resale flats starting 2013," DWG's Mr Lee said.
Owners of both private and HDB homes could also offload their flats if they are unable to rent them out, or if yields are unattractive.
But ERA's Mr Lim added that rising prices for mass market private homes may keep upgraders away, who will instead look for a flat with a good location or just stay where they are.
Where housing policy is concerned, caution seems to be the watchword, with the consultants not advocating drastic measures.
"It might be a good idea for HDB to calibrate their supply of BTO flats and ECs in 2013 so as not to create a situation of imbalance in the resale market," said DWG's Mr Lee, noting that the full impact of ramping up supply will be felt only a few years down the road.
SLP's Mr Mak sounded a warning about the unintended impact from any new policy. "Some of the HDB market cooling measures contribute to the shortage of resale HDB flats, which subsequently led to the sharper rise in resale prices," he said.
R'ST's Mr Ong sees the possibility of introducing taxes. For example, levies could be placed on owners who hold onto both their private and HDB homes, or taxes could be imposed on COVs above a certain figure.