COVs for resale flats fall to two-year low

PHOTO: COVs for resale flats fall to two-year low

SINGAPORE - Cash premiums for resale flats have hit their lowest level in more than two years, as the cooling measures introduced at the start of the year continue to make their impact felt.

According to data released on Friday by the Singapore Real Estate Exchange (SRX), premiums fell to $24,000 last month, a new low since February 2011 when they were just shy of $22,000.

And it is not just the overall median cash-over-valuation (COV) for Housing Board units - which was at $35,000 in January - that has been falling steadily.

Median resale prices dipped to $450,000 last month, from $457,000 in May.

The number of resale flats changing hands has also fallen. Just 1,210 were sold last month, compared with 1,790 a year ago. Larger units such as executive flats and five-roomers saw the biggest dip.

ERA Realty key executive officer Eugene Lim believes the cooling measures, which include a cap on the size of bank housing loans, have been effective in slowing the rate at which prices of resale flats were climbing.

"What has happened is that some buyers are no longer able to afford to upgrade to larger flats, because of the smaller loans." Households can now use only 30 per cent of their monthly pay to service a bank mortgage. Before this year, there was no cap.

Figures from HDB earlier this week also showed resale flat prices grew by just 0.5 per cent in the second quarter of this year, the lowest level since 2009.

Just 7,555 resale flats were sold in the first half of this year according to SRX, compared with 10,890 over the same period last year - a 31 per cent drop.

R'ST Research director Ong Kah Seng said: "Overall, cautiousness has effectively set in for buyers of resale flats. They are rethinking their purchases, and not many buyers are impulsively trading off location for a far-flung home which fits within their budget."

SLP International's head of research Nicholas Mak said the slowdown suggests that the Government's attempts at engineering a soft landing in the housing market were working.

"Limiting the purchasing power of buyers and pushing out more flats seems to be doing the trick in reining in prices."

HDB has been launching new flats, including 25,000 this year, in record numbers in the past few years to satisfy demand.

Mr Lim added that while falling premiums and prices may entice affluent second-timers back into the market, he expects prices to go down even further with more new flats in the pipeline.

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