Lower COVs draw buyers back to HDB resale market

THE number of Housing Board resale flats changing hands is creeping back up, according to estimates from property firms.

They said buyers are returning to the resale market now that cash premiums, known as 'cash over valuation' or COV, have fallen and stabilised.

There is also rising demand from second-time flat buyers, permanent residents and a burgeoning
According to agency data culled from several firms, overall median COVs are now about $26,000, compared to $35,000 in the fourth quarter of last year.

ERA Realty's key executive officer, Mr Eugene Lim, said this was because valuations, which are based on previously transacted prices, were catching up with selling prices.

COV is the difference between the selling price of a flat and its valuation. It is payable entirely in cash, making high COVs an impediment for HDB resale flat buyers.

Mr Lim also noted that lower COVs were enticing more second-timers back to the resale market, in spite of recently tweaked rules spelling higher chances for this group to purchase a new HDB flat.

In March, the quota for second-timers, or those who have already enjoyed a housing subsidy, went up from 5 per cent to 15 per cent for new flats in non-mature estates.

'Softening COVs mean that they have become comparable to the resale levy they fork out if they want a new flat,' he said.

Depending on flat type, the resale levy for a second-timer ranges between $15,000 and $50,000.
The steady rise of suburban condominium prices, including that of executive condominiums, has been another factor.

With three-bedroom units in far-flung areas like Sengkang and Pasir Ris crossing the $1 million mark, buyers are turning back to HDB resale flats which offer better value for money in terms of space.

The rise of private property prices has also led to another phenomenon: downgraders who cashed in the profits on their condominium units and now want to move back into HDB units.

ERA's Mr Lim said the proportion of HDB resale flat buyers with private property address has risen to 30 per cent now, from 25per cent last year.

In all, property experts say the market is calmer now, having digested the various government measures to ease the public housing crunch.

Source: The Straits Times – 10 July 2012