Small Residential Supply Pushes Prices Up

RESIDENTIAL MARKET

Reduced supply pushes prices up

Despite a record number of new flats launched by the Housing Board (HDB), prices of resale units continue to rise - 3.9 per cent so far this year - outpacing both the private market and economic growth.

This, said analysts, is largely due to a reduced supply of resale flats as more HDB dwellers choose to sublet their units when they upgrade to a private home.

Helped by low interest rates and healthy rentals from HDB units, these dual-property owners - of whom there are 33,000, or 4 per cent of all HDB flat owners - can use the rental to help cover mortgage payments on their private property.

Owners and analysts said a 2010 cooling measure - which barred private-property owners from owning both private and public homes - has also made HDB upgraders more determined to hang onto their flats.

Owners of private property who buy HDB flats must dispose of their private home within six months.

However, those who own flats can still buy private property.

And after they have stayed in the flats for the minimum five years, or less in some cases, they can rent out the whole unit while living in their condos.

The number of resale transactions has dropped by a quarter since the 2010 measure. In 2010, 32,000 resale flats changed hands. Last year, this fell to 25,000 and the figure for this year is expected to be the same.

At the same time, the number of HDB units rented out has skyrocketed. In 2009, about 24,000 units were approved for subletting by HDB. This has surged to 43,000 as of the third quarter of this year, an 80 per cent increase. This means that about 4.5 per cent of the stock of HDB flats is being sublet out.

Agency bosses said their subletting business has grown by 10 to 20 per cent while resale transactions have shrunk by about the same proportion.

DWG senior manager of training, research and consultancy Lee Sze Teck expects the bottleneck in the supply of resale flats to ease in a few years, when those who are waiting for their new flats to be built get their keys and sell their old units.

With the Government curbing the number of foreign workers and a huge supply of new flats and private units, analysts expect rental yields to fall in a few years.

The HDB has rolled out a record 27,000 new flats this year, and there are over 100,000 new private residential units and executive condominiums in the pipeline..

Source: The Straits Times – 3 November 2012