MORE build-to-order (BTO) flats introduced in September and the recent raising of the income ceiling for HDB homebuyers have slowed sales of resale public housing flats.
However, the ramp-up in public housing supply has failed to stop prices of resale units from rising.
Data from the Housing and Development Board (HDB) released yesterday showed resale applications falling 10 per cent to 5,903 cases in Q3 from 6,581 the previous quarter.
At the same time, resale units continued to exchange hands at ever higher prices. The HDB Resale Price Index hit a record high of 187.2 in the third quarter, 3.8 per cent higher than the previous quarter, and 11.6 per cent higher than Q3 2010.
In Tampines, for example, the median resale price of an executive flat was $630,000 in Q3 - 4.8 per cent higher than Q2's $601,000.
In September, HDB attempted to cool demand in the secondary market by putting up 8,200 BTO and sale-of-balance flats (SBF) for sale.
It announced yesterday that it would launch 4,200 BTO flats in Bedok, Bukit Panjang, Hougang, Punggol and Yishun in November. This brings the tally of public housing flats launched in 2011 up to 28,000 units.
Propnex Realty CEO Mohamed Ismail said that weakened resale transaction volumes show that the increased supply of public housing and the recently raised income ceiling for first- time buyers has persuaded some homebuyers to cross over to the BTO flat market.
'The lack of supply and high prices (of resale flats) have made it more difficult to conclude deals,' added ERA Realty key executive officer Eugene Lim.
Yet, resilience in resale flat prices means that demand for these units remains strong, say experts.
'The release of these new flats has not eradicated the strong demand for resale flats consisting of buyers who are singles, permanent residents, HDB upgraders and downgraders, as well as private property downgraders,' noted Mr Ismail.
The supply of HDB resale flats has remained tight, adding to price increases.
Homeowners grew reluctant to part with their property to get another after the government lowered the loan-to-value limit to 60 per cent for existing homeowners, leading to a supply crunch.
'This is worsened by the mindset that sellers add on a COV (cash over valuation) component despite increasing valuations. They are able to do this because supply is tight and demand is strong,' said Mr Lim.
For an executive flat in Tampines, median COV was chased up to $68,000 in the third quarter, from $51,000 in Q2.
Real estate analysts see resale transactions and prices moderating in Q4.
'With COV becoming a thorny issue with many young couples, it is expected that they will opt for new flats since the amount of cash they are forking out can be less or similar to what they pay for a resale flat,' said Dennis Wee Realty.
Mr Ismail thinks COV levels will rise further in Q4 before plateauing by mid-2012.
But there is a chance that COV levels will edge higher, he cautioned.
'If would-be HDB upgraders continue to be priced out of mass-market private properties, and the supply of resale flats does not rise fast enough or remains limited due to the minimum occupation period for both first-timers and non-first-time buyers, then increased demand for HDB resale flats may push COV levels up even further,' said Mr Ismail.