Saturday, September 11, 2010

CNA: HDB sellers more willing to negotiate lower cash premiums: analysts

By Hoe Yeen Nie | Posted: 11 September 2010 1825 hrs 
Photos1 of 1
HDB flats

SINGAPORE : Analysts have said the recent changes concerning the HDB resale market have spooked sellers, and the sellers are more willing to negotiate a lower cash premium to sell off their flats, as they feel that prices may fall amid a smaller pool of buyers.

For the past few months, Michelle Yow has been hunting for a three-room HDB flat in Toa Payoh and Boon Keng.

But she has been put off by high cash premiums - or cash-over-valuation (COV) prices - some as high as S$80,000.

Since new rules kicked in on August 30, things have turned in her favour.

One seller even lowered her asking COV from S$45,000 to S$30,000 in a day.

Ms Yow said: "Previously, homeowners were only willing to go down maybe a few thousand dollars, now I see homeowners actually going down by up to S$15,000.

"We kind of sense that there is more of an urgency for homeowners to sell their flats at this point, because they are more willing to negotiate for a lower cash top-up value."

Many expect the pool of buyers of resale flats to shrink as a result of the changes, although genuine buyers will not likely be deterred.

Some analysts estimate that the changes will remove about 30 per cent of demand in the HDB open market, mostly coming from investors.

These include private property owners who now have to sell off their properties within six months of purchasing an HDB flat.

Donald Yeo, who is Head of Marketing, Recruitment & Training at HSR International Realtors, cited an example of an HDB flat owner who recently bought a private condominium. The apartment was still under construction, and he would only get his keys in the middle of next year, which is when he would have to start servicing his mortgage. The owner had intended to sell his HDB flat at some point to help finance his condominium, but decided to do it sooner than later.

Mr Yeo noted: "His worry is, what is going to happen in the next nine months? What if another rule comes on? What if I decide to put my flat back into the market, but the pool of buyers has been diluted?"

Eugene Lim, who is associate director at ERA Asia-Pacific, said: "Before the announcement, where prices were accelerating, most sellers tended to be, I would say, a little bit arrogant. They probably thought, 'this is my price and if you do not want, then it is okay'.

"Over the last two weeks, we have seen a gradual shift in attitude. Not price-cutting, but more open and more negotiable. They also realise that if I want to sell my house when it is still at a high price, which is now, I should be open to reasonable offers.

"Currently, if you ask me, there is still a slight standoff between buyers and sellers, because everybody is actually waiting for the other person to make a move."

The wait-and-see approach is also being taken by some Permanent Residents.

Mr Yeo said: "If you own an overseas property and you want to own a HDB property in Singapore, you will have to sell your overseas property within six months of buying the public flat. But the question is, how to check?

"But of course, if they were to kick off these rules, they must have areas that they can spot this, whether the purchaser owns overseas properties or not..."

Most experts agree that the latest changes are aimed at stabilising the HDB resale market, but this does not mean that prices will necessarily fall. As long as the economy and employment continue to grow, prices will still increase, just at a much slower rate. And for that reason, it is unlikely that median cash premiums, which now stand at about S$30,000, will fall to the old levels of S$3,000 or even S$6,000.

As for the private resale market, analysts said the cautious mood prevails, although transaction activity is still healthy.

And with more supply being planned, buyers in the open market will be more discriminating about their choices. - CNA/ms 

Team Marshe
Martin Koh/ Sherry Tang
93833992/ 98444400

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