Prices of resale HDB flats fell 0.9 per cent in the third quarter of this year as the number of sellers offloading their flats below valuation grows.
Not only was it the first decline since the start of 2009 when a deep recession hit, but the typically strong third quarter also saw the number of deals dropping to 4,529.
This is a 13 per cent dip from the preceding quarter and a far cry from the 6,560 deals done in the third quarter of last year.
Private home prices, on the other hand, rose 0.4 per cent in the third quarter, according to the Urban Redevelopment Authority.
The price decline in public housing, property analysts say, is a result of stricter controls on home loans as well as the attractiveness and volume of new Build-To-Order offerings.
PropNex chief executive Mohamed Ismail said the resale market has been serving mostly HDB upgraders of late.
This is because singles can now purchase new flats direct from the Housing Board, while newly minted permanent residents have to wait three years before they can buy a resale flat.
As a result, market sentiment is poor, and this has led to some sellers putting their flats up for sale at prices below valuation before the market dips further, he noted.
"These are sellers who are in sore need of cash. (The flats) can either be in areas where supply is far greater than demand such as Punggol, or less desirable units in areas where valuations are already high, such as the central areas like Toa Payoh," he said.
In Punggol for instance, the median resale price and cash over valuation (COV) of a five-room flat - at $560,000 and $30,000 respectively in the second quarter - has fallen in the third quarter to $542,000 and just $8,000.
According to agency data, the median COV has dropped from $35,000 at the start of the year to $15,000 now, and transaction volumes are heading towards a 16-year low.
"The market is still feeling the effects of the cooling measures introduced at the start of the year, although flats in good locations will be able to hold their price," added ERA Realty key executive officer Eugene Lim.
Now, a buyer can use only 30 per cent of his gross monthly income to service the mortgage of his HDB resale flat.
The maximum loan terms from HDB and private banks were also reduced to 25 and 30 years respectively.
Together with the 60 per cent cap on total debt obligations introduced in June, the curbs have forced buyers to take out smaller loans and scale down purchases.
The latest data showed a 0.6 per cent rise in the number of flats approved for rent.
"A lot of HDB upgraders are keen to rent out their flats, especially now that many new private properties have been recently completed," said R'ST Research director Ong Kah Seng.
Public housing, he added, typically provides "good rental yields" of around 5 per cent.
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