CASH premiums for Housing Board flats dropped to a new low last month, in line with earlier predictions that they will fall to $10,000 by the year end.
The weakness was replicated in the private home resale market, Singapore Real Estate Exchange (SRX) flash estimates showed yesterday. Prices fell for the second consecutive month due to new projects drawing buyers away from the resale market.
And as prices dipped, more properties, both public and private, changed hands last month than in September.
It signalled a "cautious recovery" after a slew of market-cooling announcements in the latter half of the year, said analysts.
In private housing, resale prices dipped 0.1 per cent last month from September mainly due to a price decline in the suburban region. This was after they dropped 1.6 per cent in September from the preceding month.
The main culprit was mass market homes, where resale prices slid 1.4 per cent month-on- month in October. City centre prices also decreased 0.5 per cent. These outweighed a 0.4 per cent rise in the city fringe.
In public housing, the median cash over valuation (COV) fell by $3,000 to $12,000 last month. This was the lowest since it hit $10,000 in July 2009.
ERA Realty key executive officer Eugene Lim said: "We can expect COVs and resale prices to continue moderating in the fourth quarter and possibly the first quarter of next year, when transactions are traditionally slower due to the festive period."
The lower mortgage servicing ratio, shorter loan tenure and three-year wait before new permanent residents can buy flats have dampened demand.
Mr Lim added, however, that well-located public housing flats will "still command a premium" due to scarcity and a "strong following of buyers who desire to be located there".
Indeed, most of the transactions which sold at zero or negative cash premium last month were in newer estates like Sengkang and Punggol. These deals made up 16 per cent of PropNex's HDB transactions.
One seller in Sengkang sold his flat at $40,000 below valuation, said PropNex chief executive Mohamed Ismail. Cash premiums average $5,000 and $8,000 in Punggol and Sengkang respectively, he said, adding that the numbers point to "a downward trend".
It seems certain that the HDB's efforts to correct the market are working, said experts.
"Gone are the days of supernormal returns on HDB flats," said R'ST Research director Ong Kah Seng. "Sellers have more realistic views and flats will still remain an asset, but it won't be like one or two years ago where abnormal profits were guaranteed."
That may account for the 26.5 per cent rebound in transaction volume, with 1,318 flats sold last month compared to 1,042 in September.
September's low volume was "quite natural - a knee-jerk reaction to cooling measure announcements", said Mr Ong.
"Now that the measures are already working, it makes sense that October's volume has risen. It is recovering but sentiment is remaining cautious."
Additional reporting by Melissa Tan
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