Buyers, sellers more willing
As HDB transactions rise while prices fall, experts weigh in on unusual phenomenon
Something strange happened after the Housing Board's new valuation rules kicked in about two months ago: After months of sliding, the number of units changing hands has gone up, but prices continued going down.
Why did this happen?
Under new rules, buyers and sellers agree on a price before a valuation is done.
The old way of doing things was to get a valuation done before the agreed price.
And for some units, that meant haggling over the cash-over-valuation (COV) component.
Observers think sellers are selling based on their old valuation, which has a validity of three months.
Some sellers believe that after the change, their homes may come at a lower valuation, while some buyers believe the homes may actually be valued at a higher price.
So in consumer speak, you have a very willing seller and buyer.
Property agent Derek Woo thinks that the change in rules may be a factor which influenced the recent increase in transactions.
"The uncertainty could have led to a knee-jerk reaction. Both buyers and sellers are keen to use their valid valuation which they had got before the new rules kicked in," said Mr Woo, a Propnex associate team director.
"Sellers are also more reasonable now. They realise if they keep holding on, they'll lose out in the future," he added.
The April flash estimates released by the Singapore Real Estate Exchange show the number of resale HDB flats transactions are at its highest in nine months, and the figures have been rising for the past two months.
On March 10, it was announced that a certified valuation can be obtained by a buyer only after a flat is sold.
Previously, sellers were the ones who obtained a valuation to guide their asking price and the COV.
Property agent Jeffrey Lee said buyers and sellers could have become used to transactions without a valuation.
"Sellers are more motivated to sell now, before prices go down, and prices have become more attractive to buyers," said Mr Lee, a deputy division director at ERA.
He said valuations of flats have gone down in recent months due to many transactions closing at valuation or below valuation.
But Mr Albert Lu, the chief executive officer of real estate firm C&H, does not think that the recent pick-up in sales were due to the new rules.
Mr Lu points out that the property market generally picks up after March, after the holiday season.
In fact, he thinks that transaction volume will continue to rise for other reasons.
He said: "Prices have become friendlier. Those who have been holding back on buying a resale, due to the loan restrictions, are returning to the market.
"HDB has also announced that it will slow down the release of new BTO flats this year."
And why have prices continue to slide?
Mr Lee said the new rule would lead to more conservative offers from buyers, who are worried they would find out later that they are not able to afford the flat.
"They don't want to take the risk and will transact at prices based on recent transactions, with a difference of $1,000 to $2,000 at most," he said.
Mr Lu thinks prices will continue to soften, but it will not be dramatic.
"People cannot wait to buy or sell their flat forever. It's time that the market picked up," he maintained.
HDB flash estimates for April
0.2 per cent drop from previous month
5 per cent drop compared with the same period last year
This is a nine-month high, but a 14.4 per cent drop compared with the same period last year
1.1 per cent drop from previous month
3.8 per cent drop from previous month
Estates with most transactions:
Jurong East, Tampines, Woodlands
HDB resale transactions