SINGAPORE — The growth in prices of public housing continued to slow, with resale flat prices registering sluggish growth in the second quarter of the year, following cooling measures implemented in January.

In the latest flash estimates by the Housing and Development Board (HDB) yesterday, the Resale Price Index rose 0.5 per cent for April to June — the lowest quarter-on-quarter increase since the first quarter of 2009.

This follows a modest increase of 1.3 per cent in the first three months of this year.

However, the cooling measures did little to curb demand for private homes. Led by the sales of homes in suburban areas, the private residential property index reached a new peak in the second quarter of the year, climbing 0.8 per cent compared to the 0.6 per cent increase in the first quarter, according to flash estimates released by the Urban Redevelopment Authority.

Industry watchers expect the gradual increase in resale flat prices to continue as an after-effect of the cooling measures implemented in January — where eligibility for loans to buy HDB flats was tightened — together with the large supply of Build-to-Order (BTO) flats being released.

“Demand has … been sapped by the release of new BTO flats. As a result, the resale market is effectively serving only the upgraders and permanent residents now, resulting in the weakening of price and volume of transactions,” said CEO of PropNex Realty Mohamed Ismail. “It is also believed that the larger oncoming supply has created a ‘balancing effect’ in the resale market — gradually softening the price growth to a more sustainable level.”

With the size of housing loans restricted by a 30 per cent cap on mortgage payments, consumers’ purchasing power has also been reduced, leading to the deflation of price-growth momentum, said Mr Nicholas Mak, Executive Director for Research and Consultancy at property firm SLP International.

The loan caps have pushed down Cash-Over-Valuation (COV) prices, with median COV falling to between S$26,000 and S$28,000, according to data from PropNex and ERA Realty Network. This was because buyers had to compromise their requirements or go for cheaper flats which are smaller or not so well-located, said ERA’s Key Executive Officer Eugene Lim.

According to ERA’s figures, three-room flats registered the largest fall in COV at 21.8 per cent from S$28,000 to S$21,888 as buyers for these flats tend to have lower household incomes and are therefore most affected by the loan caps, Mr Lim said.

The softening of resale prices and transaction volume will likely continue as the Government continues to roll out more HDB flats, said experts. This month, the HDB will offer about 3,800 BTO flats in Bukit Merah, Sengkang and Yishun.

Also, restrictions on the use of Central Provident Fund (CPF) monies for the purchase of HDB flats with short remaining leases, which the Government announced in January, will kick in from this month. This is likely to impact the prices of older HDB resale flats in the months to come, said Mr Lim.