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SG Slowing BTO supply won't affect resale flat market

Property Here - Thursday, December 05, 2013

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After three years of ramped-up construction, reducing the supply of Build-to-Order (BTO) flats makes perfect sense considering reduced buyer demand. But the move will not affect resale prices, revealed media reports quoting analysts. 

This is because given that pent-up demand for new flats has now been addressed, “the profile of buyers going for resale flats and BTO flats is generally different”, said R'ST Research Director Ong Kah Seng.

Analysts were responding to comments made by National Development Minister Khaw Boon Wan that the housing board will taper off its “massive construction programme” from 2014.

The three years of ramped-up BTO supply means that first-time buyers can purchase a new flat instead of a resale flat. This exercise along with the introduction of various cooling measures has helped ease demand for resale flats. As a result, cash premiums and resale prices have fallen.  

Meanwhile, analysts doubt that the tapering will move buyers back to the resale market.

This is because tapering is the result of reduced buyer demand, Ong said. The excess demand, which dates back to the period of severe shortage of more affordable flats, has already been satisfied. 

In addition, sellers of resale flats are not expected to raise prices since the cooling measures have curbed the ability of buyers to purchase pricey flats. 

Chris Koh, Director of property consultancy Chris International, noted that some demand may return to the resale market, but only if supply falls such that it becomes difficult to acquire a BTO flat.

But he does not expect this to happen and is maintaining his earlier forecast that resale prices will drop five to 10 percent in 2014.