Due to weak resale prices of Housing Board flats, many apartment owners are hesitant to sell their units when they are eligible, instead choosing to hold on to them. When looking back about two years ago, those who became eligible after having remained for the five year minimum required, about 1 in 5 would quickly sell their unit when it came time to do so.
However, due to the market cooling down last year, a lower rate of 5.5% of those who met the MOP (minimum occupation period) have actually done so. HDB figures have shown that, out of the 8,521 possible units only 470 of these have actually been sold on within the year they became eligible to do so.
Resale Market Volume Drops
According to Chris Koh, director of Chris International, it is not so surprising that very few of these eligible units have changed owners with the overall resale market being as dull as it has been.
Figures also show that HDB resale transaction have fallen to about 18,100 from last year, which is the fewest number seen since 1997.
Experts have also pointed out that many apartment owners are hesitating and holding on to their units as a result of the low resale prices as well as COV (cash over valuation) figures. In the first annual decline since 2005, 2013 overall has seen a 0.6% fall in resale prices.
Cash Over Premiums for Units Drops
Looking at cash over valuation premiums, we once saw them reaching a six figure price for the best units. However, they have been excluded from March’s resale process due to February’s figures seeing them fall to a median of zero.
Another issue may be that there are many unit owners who are unable to afford upgrading but do want to sell.
We saw a cut of maximum tenure for HDB home loans in August and the fact that a buyer can only use 30% of their income towards a mortgage, an amount that is down from 35%. A similar curb is ahead for those who have hoped to upgrade to a private property.
Lastly, regardless of how many newly eligible owners wish to sell, there may simply not be enough buyers out there. The demand for resale has dropped drastically and a part of this is down to the rule changes in August that now require any new permanent residents to have to wait 3 years before they can purchase an HDB unit.