Lower COV for resale flats

HDB said that about 40 percent of resale flat buyers in the past six months managed to secure a home by paying a cash premium of $20,000 or less, despite the continuous rise of resale flat prices.

In a bid to ease tensions frayed by reports of skyrocketing flat prices, HDB released fresh figures on the amount of cash-over-valuation (COV) that buyers shell out.

In Q1 2010, 39 percent of the 7,907 resale transactions involved COVs of $20,000 or less. In another 31 percent of cases, COVs ranged from $20,001 to $30,000, while for the remaining 30 percent, resale transactions had COVs above $30,000.

The breakdown was similar in Q4 2009. Out of 8,297 resale cases, 41 percent involved COVs of $20,000 or less. COVs increased to $30,000 for another 33 percent of deals, and for the remaining 26 percent, COVs exceeded $30,000.

HDB disclosed these figures after reports of high COVs surfaced. In April, owners of a penthouse maisonette in Bishan were said to have fetched $900,000 from the sale of their flats, including a cash premium of $170,000.

Another penthouse in Queenstown almost changed hands for $950,000, inclusive of a $75,000 COV. But the deal fell through.

The average COV for all resale transactions in Q1 2010 was $25,000 – slightly higher than the $24,000 in Q4 2009.

The average COV was as low as $3,000 in Q2 2009, when the fiscal crisis was at its worst.

According to Mr. Jeffrey Hong, executive director of HSR, such news has encouraged some flat owners to demand higher cash premiums regardless of whether the reported transactions push through. Flats with COVs of “less than $20,000 are still quite hard to find,” he said.

Resale transactions in popular areas tend to command higher COVs. Based on HDB statistics for Q1, average cash premiums are highest in areas like Queenstown and Bishan.

Mr. Hong said that home seekers who can afford a cash premium of $20,000 to $22,000 will likely have to settle for a flat in the outskirts of town, like Jurong West, Marsiling or Ubi.

Mr. Eugene Lim, associate director of ERA Asia Pacific, said that the flat’s attributes also matter. He observes that COVs are usually higher for four- to five-room flats, as well as for newer flats in good condition.

COV levels have stabilized recently, said both agents. Mr. Lim said that flat valuations are high, and that has placed a limit on how much buyers can pay in all.