HDB's flash estimate of Q2 2014 Resale Price Index (RPI) is 196.0, a decline of 1.3 percent over Q1 2014 and this marks a price drop for fourth consecutive quarters.
In a statement, PropNex said the falling resale prices can be due to various government measures to cool the public housing market, such as reducing the Mortgage Servicing Ratio (MSR) cap of 30 per cent and the maximum loan term of 25 years for HDB mortgage loans.
The three-year wait before new PRs can buy resale flats, and allowing singles to buy two-room BTO flats in non-mature estates are also likely to be contributing factors, and these measures work in tandem to reduce the resale demand.
However, the main reason behind the slowdown in market activity is the income cap on how much buyers can borrow to pay off their mortgage, said the statement. With smaller loans, some buyers can no longer afford to upgrade to larger flats.
Mohamed Ismail Gafoor, CEO of PropNex Realty, expects HDB resale volumes to stay flat or improve slightly in 2014 due to increased supply as there are more sellers in the market because owners are receiving their keys to BTO flats and private properties.
He predicts resale prices will soften six to seven per cent for 2014.
"I foresee this to be a quiet year for the HDB resale market, similar to 2013 which had seen the fewest deals in years. However, I expect the market to pick up in the second half as lower prices may entice buyers back into the HDB resale market to possibly upgrade to a larger flat," he said.
The RPI for the full quarter and more detailed public housing data for the second quarter of 2014 will be released on 25 July 2014.