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Chua Chor Hoon, Head of Southeast Asia Research, DTZ

Eugene Lim, Associate Director, ERA Asia Pacific

Q: How much has HDB home prices appreciated since mid 2009?

CHOR HOON: According to HDB's price index, average HDB resale prices have increased by 10.6% between Q3 2009 to Q1 2010, with 3-room flats seeing a steeper increase of 13% compared to 9 – 11% for bigger flats.

EUGENE: Since mid 2009, HDB home prices have appreciated by about 11% in general.

Q: What is the historical trend of Cash Over Valuation (COV)?

CHOR HOON: Since Q2 2009, the COV has been on the uptrend. The overall median COV was only S$3,000 in Q2 2009 and has since risen 8-fold in the second half of 2009 to S$24,000. The increase slowed down significantly in Q1 this year with the median COV stabilizing at S$25,000.

EUGENE: COV has stabilized around the current median of S$22,000 for 3-room resale flats, S$25,000 for 4-room; S$28,000 for 5-room; and S$30,000 for Executive flats.

Q: Which areas of Singapore do HDB flats command the highest resale value?

EUGENE: HDB flats that are located nearest to town command the highest resale value like Queenstown and Bukit Merah. Marine Parade also commands a premium because of the sea view and offers the 'East Coast lifestyle'.

Q: What is the market outlook on rental demand for HDB flats?

CHOR HOON: Rental demand from permanent residents, foreign workers and students will continue to be strong with the economy doing well. Plus with more expatriates earning local pay packages now, their demand rises as they now have a reduced housing budget.

EUGENE: It is expected to increase as the economy sees positive growth and many companies are increasing their headcount. For employees with a monthly rental budget of S$3,000 and below, a HDB flat is their only option.

Q: Are the value of HDB flats less susceptible to property market cycles?

CHOR HOON: As HDB flats are bought mainly for owner-occupation, the price changes are less volatile than private properties. HDB resale prices fell by just 0.8% in Q1 2009, while private property prices plunged by 14%. And since the 2009 lows, we see prices of private residences increasing by 31% compared to a more modest 12% for HDB resale flats.

EUGENE: Purchasers of HDB flats are owner occupiers unlike private properties that may be bought for investment or speculative reasons. As such, HDB resale prices are a factor of actual demand and supply, and will not follow the private property market cycle.

Did you know? COV refers to the difference between the valuation and resale price of a flat. COVs could rise or fall depending on market conditions.

Editor's Note: We regret to inform that there was an error in the ‘Understanding Your Mortgage Loan’ article from Ask OCBC Oct – Dec 2009 issue. Based on the CPF policy, members have to set aside half of the prevailing Minimum Sum in their Ordinary and Special Accounts before they can use further CPF savings up to the Housing Withdrawal Limit (not Available Housing Withdrawal Limit) to repay the loan. With effect from 1 Jan 2008, the Housing Withdrawal Limit (not Available Housing Withdrawal Limit) is 120% of the purchase price or valuation of the property at the point of purchase, whichever is lower.

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