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PRIVATE home prices may be rising steadily, but 99-year leasehold suburban condominiums that form the backbone of Singapore's property market are largely being left behind while the climb is being led by the red-hot luxury housing segment.

The prices of these 'mass market' homes are still stuck in the doldrums - and are likely to remain there for a while, despite the highest rise in two years in Housing Board (HDB) resale prices in the second quarter, say property consultants.

In the past, the mass market has been the driving force of any property market rally as HDB upgraders trade in their five-room and executive flats for these entry-level private condominiums.

But persistently low resale prices for HDB flats have dampened demand for mass market projects, which have seen very little price movement over the past three years even as prices of high-end homes hit record highs.

Prices of suburban condominiums have hovered between $450 and $500 per sq ft (psf) since 2003, while luxury home prices are now averaging $1,670 psf and are expected to rise by up to 20 per cent this year.

And even though HDB resale prices are now on the rise, this may not be enough to jump-start the mass market, analysts said.

Initial estimates released by HDB yesterday showed that resale prices for the second quarter rose by 1.1 per cent, significantly higher than the 0.2 per cent rise in the first quarter and the biggest increase in two years.

'A rise in the HDB resale index usually indicates that affordability has increased, therefore making the entry to the mass market easier,' said Mr Joseph Tan, residential director at CB Richard Ellis.

But he pointed out that HDB resale prices are still about 3.6 per cent lower than in the first quarter of last year. Prices then took a nosedive after 'anti-cashback' measures were announced by the Government in a bid to stop HDB home buyers overstating flat prices to get larger loans.

Lower HDB resale prices and the recent property downturn have made potential upgraders less willing to 'go out and snap up condos', said ERA Singapore assistant vice-president Eugene Lim.

'Owning private property is still an aspiration for many people, but they are more careful nowadays compared to a few years ago,' he said.

'Those who bought their HDB flats during the property market peak are probably still sitting on negative assets and are unwilling to cut their losses. As long as they don't sell them, it's just a paper loss.'

Analysts also noted that other factors - such as a lack of supply of new suburban condominiums and rising interest rates - are still holding back the mass market and therefore a broader property market recovery.

Knight Frank's director of research and consultancy, Mr Nicholas Mak, pointed out that one key reason stopping HDB home owners from upgrading is simply that there is nothing good to buy in their preferred area.

Only one major mass market project, GuocoLand's 625-unit The Quartz at Buangkok, has been launched this year. Of the more than 200 units released by GuocoLand since May, slightly more than half have been sold.

'Upgraders as a group tend to be less mobile, especially if they have children who go to school near their HDB estate,' said Mr Mak.

'So if there is no supply, no new condos being launched in the area, chances are the HDB residents won't want to move across the island and will just stay put.'

As of last month, there were about 1,300 mass market units that had been launched that had remained unsold, he said.

Another major factor tempering upgraders' demand is rising interest rates, which translate into higher mortgage rates, said ERA's Mr Lim.

'Mass market buyers tend to be more price-sensitive, so higher home loan rates will take away buyers sitting on the fence,' he observed.

fiochan@sph.com.sg