After a shortlived dip of 0.1% in Q1 2012, private home prices rebounded by 0.4 % while HDB resale prices gained 1.3% in Q2 2012 after gaining 0.6% in Q1 2012.
As the 0.6% rise in Q1 2012 was the smallest since Q1 2009, this had lead to speculation that HDB prices had topped and correction may be in the card. However, this slowdown in price gain for HDB resale flats in Q1 2012 which led to lower cash over valuations (COVs) has attracted more buyers back into the HDB resale market.
Some analyst mentioned that median COVs for 5-room flats were 27% lower in the Q1 2012 compared to Q4 2011. Potential buyers who have failed to secure a new HDB flat from the more than 8,000 new HDB flats launched in March 2012 might have formed a formidable buying demand for HDB resale flats in the subsequent quarter.
Adding to the demand for HDB resale flats might have came from previous private home owners who had taken the opportunity to cash out from their mass market private properties and bought HDB resale flats.
Some analysts expect HDB resale prices to flatline as they felt that buyers are becoming reluctant to pay high COVs. While others expect resale HDB prices to increase by about 5% for the rest of the year.
COVs for HDB resale flats are expected to hover at about $26,000 which the the average for the first two quarters which is below the $35,000 in Q4 2011.
As for the private home property market, experts had noted the resilience despite a slew of cooling measures since September 2009.
The 0.4% quarterly gain was recorded on the back of low interest rates and flush of liquidity. In view of the volatility in alternative investment vehicles like stock, foreign exchange and commodities, more investor are relying on real estate to hedge against inflation and to provide a decent return on investment.
Interestingly, city centre private residential prices gained 0.6% compared to a loss of 0.6% in Q1 2012 while city fringe residential prices remained flat and prices in suburban areas gained 0.4%.
3 Jul 2012