Date: 24 October 2008

Analysis of Singapore Public Housing Market – 3Q 2008

Singapore, - The Housing & Development Board (HDB) released information for public housing statistics today. Unlike the private residential market which is affected by the current economic woes, the public housing market continues to achieve positive growth, in terms of sales activity and price increases.

According to HDB, average HDB resale flat prices grew 4.2% qoq in 3Q 2008. The resilient resale flat prices was partly due to a laggard and gradual price increase compared to private residential properties in the recent years, and a possibly healthy demand for resale HDB flats from Permanent Residents in Singapore and newly- formed families.

There is a possibility is that buyers of residential properties, especially newly-formed families, are increasingly cautious in this economic uncertainty and prefer to purchase HDB flats instead of private residential properties. Compared to purchasing private residential properties, buying a HDB flat may allow some to set aside funds for liquidity during this uncertainty. Although private home prices may have shown some decline, it is still considered costly as the escalations in 2007 have driven some of such prices to record highs. These include some who may be underpinned by affordability in private residential homes notwithstanding rising housing aspirations. Similarly, there may therefore be some who have been priced out from the private residential market and are interested in buying well-located HDB resale flats. These bring average HDB resale prices of 3Q 2008 to be 0.4% above the all-time high in 4Q 1996.

In terms of resale activity, the total number of resale applications has increased by a lesser 4.5% qoq this quarter, totaling 8,112 resale applications. The strongest increase was reflected in the larger 5- room flat market by 8.8% qoq to 2,172 flats. This further supports the increasing interest for higher-tier HDB flats as an alternative to some private residential properties.

Despite the generally cautious mood during this economic uncertainty, there were still flats concluded at above S$700,000 per unit, particularly in areas such as Marine Parade, Queenstown and Bukit Merah. This reflects positive home-buying sentiments for well-positioned flats with growth potential. Additionally, excluding flats under the Design, Build and Sell Scheme, the 50-storey Pinnacle@Duxton, scheduled for completion this year, have prices starting at S$545,000 and reaching S$645,800, much higher than the record held by a S$531,500 five-room unit in Toa Payoh.

Prices of resale flats are likely to have grown by 15-17% for the whole of 2008. The performance of the public housing market is expected to remain encouraging although price increase is likely to moderate to single-digit percentage increase for 2009, in light of increasing economic uncertainty.