Khaw: I can't abolish HDB cash premiums

[mr funny]

http://www.straitstimes.com/Singapore/Story/STIStory_700823.html

Khaw: I can't abolish HDB cash premiums

Removing COVs could lead to under-counter payment, minister says

Published on Aug 11, 2011

By Jessica Cheam, Housing Correspondent


NATIONAL Development Minister Khaw Boon Wan has made clear his position on cash premiums that Housing Board (HDB) flat buyers pay to sellers: He cannot abolish them.

Responding to Internet users on his Facebook page on National Day, Mr Khaw explained that these premiums, also known as cash over valuation (COV), are determined by buyers and sellers and cannot be removed.

Mr Khaw had posted a National Day celebration update and engaged with netizens on a few issues ranging from housing prices to recessions for over an hour.

One user, Lee Soh Geok, asked Mr Khaw why he is against removing COV, which has spiked in recent months due to high demand for HDB resale flats amid a supply crunch.

COV is the amount a buyer pays over and above the valuation of an HDB resale flat. As it must be paid in cash, it has a significant impact on affordability.

Mr Khaw replied: 'It is simple... COV is the difference between (a) price of flat as agreed between buyer and seller and (b) the valuation of the flat given by a professional valuer. (b) is done by an objective professional. (a) is between buyer and seller.

'Abolishing COV means removing (a)? Then who sets the price? The professional valuer? Years ago, it was tried. COV then went underground as 'under counter cash payment',' he wrote.

Mr Khaw was referring to 'cash-back' schemes which were exposed back in 2001, which involved buyers and sellers over-declaring the agreed selling price.

It allowed the buyer to get a higher loan either from a bank or the HDB, with the 'extra' cash illegally divided out among those involved.

In recent years, other ways of getting around the rules have surfaced, including a 'magic dollars' scam where buyers and sellers falsely declared a low sale price - with the buyer giving the seller some cash in return.

Such offences are punishable by a jail term and/or a fine.

ERA Realty key executive officer Eugene Lim told The Straits Times yesterday that it is 'understandable' why the minister cannot ban COV.

'If you ban it, money will start going under the table... but it is true buyers and sellers are negotiating on COVs rather than the total price. We should do something to correct this mindset,' he said.

One solution is to educate buyers to think about the total sale price rather than just the COV component, he added.

The HDB could also release more up-to-date information on resale deals so buyers have a clearer picture of market prices, he added. Currently, the HDB's website releases such data but only two to three months after the transactions.

Eventually, when the HDB's aggressive supply of new flats reaches the resale market, demand will ease and COV will drop, said Mr Lim.

Mr Khaw also tackled other comments made by Internet users such as Harry Yohannan, who called for continued downward pressure on home prices.

The minister said in response: 'We have to do it gently or too many people will get hurt.'

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[hyenergix]

I was buying a bowl of noodles at the basement food court of HDB Hub yesterday evening. When I was about to pay $3.50 for it as indicated by the signboard, the auntie said I should pay additional $0.50 cash over valuation indicated by the signboard because the queue was long and demand was obviously very high for this noodle. This is not funny :mad:

[devilplate]

I was buying a bowl of noodles at the basement food court of HDB Hub yesterday evening. When I was about to pay $3.50 for it as indicated by the signboard, the auntie said I should pay additional $0.50 cash over valuation indicated by the signboard because the queue was long and demand was obviously very high for this noodle. This is not funny :mad:

got such thing meh?

u can choose not to pay n walk away la and join in the Q again elsewhr...lol....so willing buyer willing seller afterall......hahaha

[hyenergix]

got such thing meh?

u can choose not to pay n walk away la and join in the Q again elsewhr...lol....so willing buyer willing seller afterall......hahaha

Every stall holders is doing e same thing n e Minister who is paid $mil is not doing anything abt it :mad:

The above scenario is fictitious but it highlights e absurb situation when u r buying something w cov :D

[devilplate]

Every stall holders is doing e same thing n e Minister who is paid $mil is not doing anything abt it :mad:

The above scenario is fictitious but it highlights e absurb situation when u r buying something w cov :D

y COV no gd? highest bidder get it....fair and square for the resale market. if dun hf cov den how to sell ? go by balloting system? LOL.....den prices stay FLAT? even during recession, cannot sell with negative COV since no buyers willing to buy at valuation? remember every ppty is UNIQUE! no such thing as uniformed ppty prices!

just nid to implement and tighten HDB regulations like disallowing PRs to sublet their rooms immediately after they bot it. increase MOP to 10yrs etc etc

[ysyap]

COV has strengths and weaknesses. It is always good for sellers but not for all buyers. It obviously favours those with more cash on hand. :D

[devilplate]

COV has strengths and weaknesses. It is always good for sellers but not for all buyers. It obviously favours those with more cash on hand. :D

tats during bull run like now

how about recession period?

[ysyap]

tats during bull run like now

how about recession period?During recession, what COV? Negative? :o

[teddybear]

I think best thing for Khaw to resolve the COV problem is to abolish property valuation system and people can negotiate to transact at whatever price and banks to loan based on transacted price, then what COV to talk about? :p
People are just barking up the wrong tree! COV problem comes from valuation problems! COV too high just means valuation too low! :banghead:


COV has strengths and weaknesses. It is always good for sellers but not for all buyers. It obviously favours those with more cash on hand. :D

[x11]

I think best thing for Khaw to resolve the COV problem is to abolish property valuation system and people can negotiate to transact at whatever price and banks to loan based on transacted price, then what COV to talk about? :p
People are just barking up the wrong tree! COV problem comes from valuation problems! COV too high just means valuation too low! :banghead:


sounds good in theory but the practical nature of this is that it will get abused as well. inflated transaction price to get a larger loan. if we do away with the "professional" valuations that are carried out by 3rd parties, the banks will have to do their own valuations as well, similar to private property. this will then result in a similar scenario - bank value at $1M, to transact, i pay you extra $100K in cash. so you will be forcing COVs underground again.

the question of COVs and "professional" valuations are only brought up during a hot market. people complain about not being able to afford COVs. but what happens to COVs and valuations when the market cools down? remember that if during a recession and one is to sell a HDB unit below valuation, CPF still uses the valuation price to calculate the amount to return back to the CPFs account.

i agree that the current system seems painful for the buyers. but the current valuation and COV system is buyer willing / seller willing and a transaction takes place. if one cannot afford the COVs asked by the seller, they can choose to walk away and wait for the BTOs. when the BTOs are ready and the MOPs are served, the supply crunch will be solved. then this valuation and COV system will no longer be the complaint of the buyers - they will instead be the complaint of the sellers. :D

[ysyap]

That is also one reason why KBW kept pushing out BTOs to encourage people who can wait to buy from HDB direct w/o having to pay unnecessary COVs. :o

[yjcai]

pc should have cov too.

[kingkong1984]

pc should have cov too.

already in place.. just not published as the numbers are small.

[ysyap]

For pc, sometimes its difficult to place an exact figure on COV. The actual valuation must first be conducted but sometimes its more of a matter of calling the bank to see if they can match the asking price w/o doing any proper valuation and banks does not reveal their method of valuating a unit! :o

[howgozit]

Every stall holders is doing e same thing n e Minister who is paid $mil is not doing anything abt it :mad:

The above scenario is fictitious but it highlights e absurb situation when u r buying something w cov :D

COV only occurs when both buyer and seller agree that the sale price is above what it is valued.

The seller can price his property any amount, if the buyer doesn't agree, how can there be a COV situation? Can't blame KBW lah, what can he do?

Your hawker scenario IMHO is not the same.

[hyenergix]

The entire system involving cov is v odd. Juz do away with it. HDB cld b trying to protect something, most likely CPF Board i.e. e govt reserve.

[ysyap]

The entire system involving cov is v odd. Juz do away with it. HDB cld b trying to protect something, most likely CPF Board i.e. e govt reserve.As the article explains, removing it would just bring the whole COV concept under table, which is even more dangerous coz it can spiral too wildly too quickly! :D

[howgozit]

The entire system involving cov is v odd. Juz do away with it. HDB cld b trying to protect something, most likely CPF Board i.e. e govt reserve.

In order to do away with COV, HDB must first do away with its valuation in the first place. Then it becomes an open market valuation which is the same as private property. Ie. the banks take the burden of the valuation and therefore the quantum of the loan based on that valuation.

This may not necessarily reduce prices bcoz

1. the seller still can quote any price and if its below the bank valuation, the seller still expects COV. The situation does not change.

2. the bank may value the flat to the seller's expectation which may cover the old priced valuation plus COV.

3. with a reduced amount of cash upfront, buyers now have more leeway to buy up. This gives an inflationary pressure to the price as previously one may be constrained by the huge cash outlay to buy it at a higher price.

[devilplate]

I cannot tink of any better system den the current valuation plus cov.

Need to tighten hdb regulation....mabe buy condo must sell hdb....whahaha....control both resale hdb and pte condo:D

[devilplate]

I cannot tink of any better system den the current valuation plus cov.

Need to tighten hdb regulation....mabe buy condo must sell hdb....whahaha....control both resale hdb and pte condo:D
Another suggestion, revert back to gd old days tat one must stay in hdb if he own a condo.....

[howgozit]

I cannot tink of any better system den the current valuation plus cov.

Need to tighten hdb regulation....mabe buy condo must sell hdb....whahaha....control both resale hdb and pte condo:D

IMHO, MND's liberalisation of the the HDB rules was the major factor in the escalating HDB prices not the FTs.

Pre-1997, even though private property prices were sky high, HDB was still relatively affordable and nobody really complained about HDB.

[Arcachon]

IMHO, MND's liberalisation of the the HDB rules was the major factor in the escalating HDB prices not the FTs.

Pre-1997, even though private property prices were sky high, HDB was still relatively affordable and nobody really complained about HDB.

HDB build 18580 unit for Singaporean between 2006 to 2008.

https://lh5.googleusercontent.com/-7LIxOQjfSjg/TjDpHCpIvUI/AAAAAAAAGSQ/ryTnF4FlFzc/s800/HDB.JPG

[ysyap]

2006 was when HDB just about cleared the bulk of the remaining flats from the earlier over supply through walk-in-selection and demands were picking up again so they have to rush production! :spliff: