View Full Version : Rise and fall of COV – the property mover
It had a humble start in 1993 but later developed a power of its own
The Straits Times - March 12, 2014
By: Janice Heng
http://www.stproperty.sg/articles-property/singapore-property-news/rise-and-fall-of-cov--the-property-mover/a/156596
DEALS were once forged or broken over it. Headlines roared its record-setting highs. Loved by sellers and loathed by buyers, the concept of cash over valuation dominated the Housing Board resale market for years – but perhaps no longer.
In the new resale process, this cash premium or COV is not the focus of negotiations. Buyers and sellers agree on a price and get a valuation; the COV is a mere arithmetic outcome.
Yet that is what COV has always been: the difference between price and valuation.
Only when the property market was booming did it take on a life of its own – and, in turn, the power to move the market.
But its beginnings were much humbler. At the very start, there wasn't even a name for it.
This was in April 1993, when the HDB relaxed its loan policy to let resale buyers borrow up to 80 per cent of the flat's market value or declared sale price, whichever was lower. Previously, the loan was up to 80 per cent of the "posted price" – the 1984 HDB sale price – which was much lower.
The new rule meant a need to find out what a flat's market value was. Enter valuation, and hence the possibility of a gap between price and valuation: that is, COV.
By 1995, worries had surfaced, but only about the dodgy relative of COV – "paying cash upfront".
Central Provident Fund (CPF) savings could be used to pay for a resale flat up to the purchase price or valuation, whichever was lower.
If valuation was lower than the price, the difference had to be paid in cash. But to save on the sale price levy, some sellers would under-declare the sale price and ask for more cash upfront.
Though the HDB cracked down accordingly, 1996 still saw reports of buyers paying "a premium of $100,000 to $150,000... above valuation", as in one Straits Times article.
But then, with prices easing by 1997 with the Asian financial crisis, the focus shifted to flats going below valuation. Property ads blared "low cash!" instead.
And this familiar pattern played out again and again. As experts note, COV's significance rose and fell with the market.
Why wasn't it a household term in the early 2000s, for instance? Because "the property market wasn't very hot at the time", said OrangeTee head of research Christine Li. "(COV) always is a very touchy issue during an upturn in the market," said Century21 chief executive officer Ku Swee Yong.
He reckoned it was the 2006 to 2007 property cycle in which COV gained major prominence. "Up till around late 2004, prices were generally around valuation – not a huge difference, perhaps within $10,000 or so."
But by 2007, high COVs were making headlines, such as "some HDB sellers asking for up to $150k above valuation". When COV sums were so large, they became important in their own right, said experts: to sellers as sources of liquidity, and to buyers as a potential stumbling block.
It was also in 2007 that "cash over valuation" became a standard phrase, recurring in newspaper report after newspaper report.
Before then, references were simply to sums paid above or below valuation.
Perhaps gaining a fixed name was a sign of COV's growing significance. In July 2007, the Housing Board released COV data for the first time, in recognition that buyers were focusing on such information.
But the prominence of COV could itself have been encouraged by the profusion of media coverage.
Whatever the case, the idea of COV stuck. And experts think it developed a power of its own.
"When it was high, COV was often felt to be a controversial mechanism as sellers tended to compare the COV they got, instead of the actual price," said R'ST Research director Ong Kah Seng.
Buyers felt a need to chase high COVs, not simply high prices. But when deals closed above valuation, this put pressure on valuations themselves to rise.
And in a declining market, the reverse was true: buyers pushed for prices below valuation, which in turn drove valuations down.
Now, COVs have been taken out of negotiations. That could mean an end to their amplifying effect, and hence a more stable property market, said SLP International Property Consultants' head of research Nicholas Mak.
Sellers in particular could take a while to adjust, and might still seek private valuations to get a sense of COV, he added.
But PropNex Realty chief executive officer Mohamed Ismail Gafoor saw a way in which COVs might fade altogether.
The HDB's appointed valuers could follow the practice in the private market, and largely match their valuations to the reported sale price, he said.
That would close the gap between price and valuation – and, by definition, snuff out COV.
https://www.dropbox.com/s/qz4lkgmr5x5ml1y/Public%20Policies%20and%20Public%20Resale%20Housing.pdf
To further promote the resale public housing market, the “Mortgage Loan
Financing Scheme” was revised in April 1993. This scheme allows resale
public housing purchasers to obtain mortgage loans of up to 80% of the
purchase price or the market value of a housing unit, whichever is lower.
Before this policy revision, the amounts of mortgages available for resale
public housing were pegged at the HDB’s “posted prices,” which were fixed
at historical values and priced very much below transacted prices. This
change in mortgage loan financing has therefore provided a great boost to
the public housing resale market, as purchasers are now able to obtain much
larger mortgage amounts.
Finally the last nail is drive into the COV coffin since 1993, HDB must be quite free now that they don't have to fight with the private Valuation, no more subject to HDB approval.
They might want to reopen the COV coffin when EC owner start to return HDB apartment back to HDB when they can't sell within 6 months.
Finally the last nail is drive into the COV coffin since 1993, HDB must be quite free now that they don't have to fight with the private Valuation, no more subject to HDB approval.
They might want to reopen the COV coffin when EC owner start to return HDB apartment back to HDB when they can't sell within 6 months.
Opportunities are being created. Just think of all those upgraders who assumed that COV was certain and part of their calculations.
It had a humble start in 1993 but later developed a power of its own
The Straits Times - March 12, 2014
By: Janice Heng
http://www.stproperty.sg/articles-property/singapore-property-news/rise-and-fall-of-cov--the-property-mover/a/156596
DEALS were once forged or broken over it. Headlines roared its record-setting highs. Loved by sellers and loathed by buyers, the concept of cash over valuation dominated the Housing Board resale market for years – but perhaps no longer.
In the new resale process, this cash premium or COV is not the focus of negotiations. Buyers and sellers agree on a price and get a valuation; the COV is a mere arithmetic outcome.
Yet that is what COV has always been: the difference between price and valuation.
Only when the property market was booming did it take on a life of its own – and, in turn, the power to move the market.
But its beginnings were much humbler. At the very start, there wasn't even a name for it.
This was in April 1993, when the HDB relaxed its loan policy to let resale buyers borrow up to 80 per cent of the flat's market value or declared sale price, whichever was lower. Previously, the loan was up to 80 per cent of the "posted price" – the 1984 HDB sale price – which was much lower.
The new rule meant a need to find out what a flat's market value was. Enter valuation, and hence the possibility of a gap between price and valuation: that is, COV.
By 1995, worries had surfaced, but only about the dodgy relative of COV – "paying cash upfront".
Central Provident Fund (CPF) savings could be used to pay for a resale flat up to the purchase price or valuation, whichever was lower.
If valuation was lower than the price, the difference had to be paid in cash. But to save on the sale price levy, some sellers would under-declare the sale price and ask for more cash upfront.
Though the HDB cracked down accordingly, 1996 still saw reports of buyers paying "a premium of $100,000 to $150,000... above valuation", as in one Straits Times article.
But then, with prices easing by 1997 with the Asian financial crisis, the focus shifted to flats going below valuation. Property ads blared "low cash!" instead.
And this familiar pattern played out again and again. As experts note, COV's significance rose and fell with the market.
Why wasn't it a household term in the early 2000s, for instance? Because "the property market wasn't very hot at the time", said OrangeTee head of research Christine Li. "(COV) always is a very touchy issue during an upturn in the market," said Century21 chief executive officer Ku Swee Yong.
He reckoned it was the 2006 to 2007 property cycle in which COV gained major prominence. "Up till around late 2004, prices were generally around valuation – not a huge difference, perhaps within $10,000 or so."
But by 2007, high COVs were making headlines, such as "some HDB sellers asking for up to $150k above valuation". When COV sums were so large, they became important in their own right, said experts: to sellers as sources of liquidity, and to buyers as a potential stumbling block.
It was also in 2007 that "cash over valuation" became a standard phrase, recurring in newspaper report after newspaper report.
Before then, references were simply to sums paid above or below valuation.
Perhaps gaining a fixed name was a sign of COV's growing significance. In July 2007, the Housing Board released COV data for the first time, in recognition that buyers were focusing on such information.
But the prominence of COV could itself have been encouraged by the profusion of media coverage.
Whatever the case, the idea of COV stuck. And experts think it developed a power of its own.
"When it was high, COV was often felt to be a controversial mechanism as sellers tended to compare the COV they got, instead of the actual price," said R'ST Research director Ong Kah Seng.
Buyers felt a need to chase high COVs, not simply high prices. But when deals closed above valuation, this put pressure on valuations themselves to rise.
And in a declining market, the reverse was true: buyers pushed for prices below valuation, which in turn drove valuations down.
Now, COVs have been taken out of negotiations. That could mean an end to their amplifying effect, and hence a more stable property market, said SLP International Property Consultants' head of research Nicholas Mak.
Sellers in particular could take a while to adjust, and might still seek private valuations to get a sense of COV, he added.
But PropNex Realty chief executive officer Mohamed Ismail Gafoor saw a way in which COVs might fade altogether.
The HDB's appointed valuers could follow the practice in the private market, and largely match their valuations to the reported sale price, he said.
That would close the gap between price and valuation – and, by definition, snuff out COV.
While this article tries to explain the historical rollercoaster COVs have gone through in Singapore, it missed out on some important attributes. Let me explain:
1) Upfront cash has remained a necessary evil for many sellers, as they needed this cash to either fund their next purchase or subsidise the renovation costs for their next house.
2) With the exception of the most recent bull run (even though I still have my doubts), sellers always had to deal with cash in excess of the 'valuation' as the 'valuation' price always gave them CPF cash, and thus it always went back to CPF or fund their next asset purchase. People can never 'touch' this cash for their personal use.
3) In different time periods, people have always 'underdeclared' or 'overdeclared' the real transaction prices, in order to extract money away from their CPF, and that's the reason why HDB decided to legitimise the COV so that all transactions can be 'above board' and thus do away with 'under table transactions'.
We all like to believe that this time around, things will be different, but I have my doubts. This excess cash portion has gone on with HDB transactions for the last 20+ years, so my view is that this is not going to go away.....so long as people have a need to monetise their HDB assets with cash, and buyers can do away with paying a lower stamp duty, this is bound to persist.
While this article tries to explain the historical rollercoaster COVs have gone through in Singapore, it missed out on some important attributes. Let me explain:
1) Upfront cash has remained a necessary evil for many sellers, as they needed this cash to either fund their next purchase or subsidise the renovation costs for their next house.
2) With the exception of the most recent bull run (even though I still have my doubts), sellers always had to deal with cash in excess of the 'valuation' as the 'valuation' price always gave them CPF cash, and thus it always went back to CPF or fund their next asset purchase. People can never 'touch' this cash for their personal use.
3) In different time periods, people have always 'underdeclared' or 'overdeclared' the real transaction prices, in order to extract money away from their CPF, and that's the reason why HDB decided to legitimise the COV so that all transactions can be 'above board' and thus do away with 'under table transactions'.
We all like to believe that this time around, things will be different, but I have my doubts. This excess cash portion has gone on with HDB transactions for the last 20+ years, so my view is that this is not going to go away.....so long as people have a need to monetise their HDB assets with cash, and buyers can do away with paying a lower stamp duty, this is bound to persist.
Question:
1. Have you ever sold your HDB and with the above.
2. How much you know depend on whether you are in the Buyer/Seller shoe.
This is what a seller(me) in 1995.
1. Market selling at > SGD 300,000 valuation at SGD 195,000. What do you think I should be selling if I am normal, and if you will me.
This is what a buyer(me) in 1995.
1. Valuation of a 3 room HDB SGD 92,000 can get SGD 30,000 grant. Seller only willing to sell at SGD 95,000, last offer SGD 92,000. What do you think I should offer if I am normal, and you will me.
Before 10 March 2014
Valuation SGD 640,000 asking SGD 700,000.
After 10 March 2014.
NEW Asking SGD 750,000.
https://www.dropbox.com/s/1rzg6tum5t8ltl3/785000.pdf
My new asking price for XXXXXX Road will be SGD 750,000.
My lease start at 01 Jul 1997 floor area 126.00 sqm can't be selling at so much less than $785,000.00.
I am willing to give OTP of SGD 1 for buyer to get valuation at SGD 1,000,000 OTP purchase price.
https://www.dropbox.com/s/0haztkflrmclfri/1.pdf
Before 10 March 2014
Valuation SGD 640,000 asking SGD 700,000.
After 10 March 2014.
NEW Asking SGD 750,000.
https://www.dropbox.com/s/1rzg6tum5t8ltl3/785000.pdf
My new asking price for XXXXXX Road will be SGD 750,000.
My lease start at 01 Jul 1997 floor area 126.00 sqm can't be selling at so much less than $785,000.00.
I am willing to give OTP of SGD 1 for buyer to get valuation at SGD 1,000,000 OTP purchase price.
https://www.dropbox.com/s/0haztkflrmclfri/1.pdf
I tot u a property believer..
now selling..??
Need money to buy more. Going JB to buy landed and rear chicken.
...."GAME OVER".....:D:D:D
https://fbcdn-sphotos-d-a.akamaihd.net/hphotos-ak-prn2/t31/1781701_10202249949183073_1921431078_o.jpg
https://scontent-a-cdg.xx.fbcdn.net/hphotos-prn2/t31/1957716_10202263622804905_808320811_o.jpg
But HDB resale game over already liao?
Next come OCR private condos? :o
Before 10 March 2014
Valuation SGD 640,000 asking SGD 700,000.
After 10 March 2014.
NEW Asking SGD 750,000.
https://www.dropbox.com/s/1rzg6tum5t8ltl3/785000.pdf
My new asking price for XXXXXX Road will be SGD 750,000.
My lease start at 01 Jul 1997 floor area 126.00 sqm can't be selling at so much less than $785,000.00.
I am willing to give OTP of SGD 1 for buyer to get valuation at SGD 1,000,000 OTP purchase price.
https://www.dropbox.com/s/0haztkflrmclfri/1.pdf
https://www.dropbox.com/s/qz4lkgmr5x5ml1y/Public%20Policies%20and%20Public%20Resale%20Housing.pdf
To further promote the resale public housing market, the “Mortgage Loan
Financing Scheme” was revised in April 1993. This scheme allows resale
public housing purchasers to obtain mortgage loans of up to 80% of the
purchase price or the market value of a housing unit, whichever is lower.
Before this policy revision, the amounts of mortgages available for resale
public housing were pegged at the HDB’s “posted prices,” which were fixed
at historical values and priced very much below transacted prices. This
change in mortgage loan financing has therefore provided a great boost to
the public housing resale market, as purchasers are now able to obtain much
larger mortgage amounts.
Look what happen when they started in 1993 under HDB control valuation.
History will repeat itself.
It just started, Valuation under control since 1993. When they let market decided look what will happen.
Before 10 March 2014
Valuation (under HDB control) SGD 640,000 asking SGD 700,000.
After 10 March 2014.
NEW Asking SGD 750,000. (market value)
https://www.dropbox.com/s/1rzg6tum5t8ltl3/785000.pdf
My new asking price for XXXXXX Road will be SGD 750,000.
Blk
Lease Start Date : 01 Jul 1997
Lease Duration : 99 years
Remaining Lease : 82 years (as at date of enquiry)
My lease start at 01 Jul 1997 floor area 126.00 sqm can't be selling at so much less than $785,000.00.
28 Cassia Cres 16 to 20
120.00
Improved
1998 $785,000.00 Mar 2014
I am willing to give OTP of SGD 1 for buyer to get valuation at SGD 1,000,000 OTP purchase price.
https://www.dropbox.com/s/0haztkflrmclfri/1.pdf
But HDB resale game over already liao?
Next come OCR private condos? :o
Question:
1. Do you have a HDB?
2. Are you a buyer or Seller?
3. What will you do if you will me?
4. Will you feel the game have just started after knowing the history?
I can't stop people from selling low, I know I can stop myself.
https://www.dropbox.com/s/1rzg6tum5t8ltl3/785000.pdf
https://www.dropbox.com/s/0haztkflrmclfri/1.pdf
https://www.dropbox.com/s/qz4lkgmr5x...%20Housing.pdf
But HDB resale game over already liao?
Next come OCR private condos? :o
some time ago already said Hdb will be correct to its affordable prices.
no one believe. and with more and more cms whacking the Hdb, pple then kbkp
next Pte pty. just wait and see..
proud owner
12-03-14, 23:05
Arachon
have I mistaken or are you the guy who lives and works in France ?
Need money to buy more. Going JB to buy landed and rear chicken.
R u serious or r u kidding?
R u serious or r u kidding?
Serious, I love gardening, my colleague retire end of last year 2013, now staying in JB landed.
Almost brought a 2 Bedroom in JB but CIMB chicken out last minute so sad.
Arachon
have I mistaken or are you the guy who lives and works in France ?
France now is 16:20. Love is in the air (Spring).
some time ago already said Hdb will be correct to its affordable prices.
no one believe. and with more and more cms whacking the Hdb, pple then kbkp
next Pte pty. just wait and see..
If you are the COW, what will you do?
https://fbcdn-sphotos-b-a.akamaihd.net/hphotos-ak-ash3/t1/1896957_10152217637417040_902751500_n.jpg
http://www.skyscrapercity.com/showthread.php?p=112178155#post112178155
For private, actually it is already dipping fast.
Recent news reported the transacted no back to subprime era. holy cow.
There will be a lot of buyers in 2010-2013 waiting their turns to clear their units to avoid SSD.
some time ago already said Hdb will be correct to its affordable prices.
no one believe. and with more and more cms whacking the Hdb, pple then kbkp
next Pte pty. just wait and see..
For private, actually it is already dipping fast.
Recent news reported the transacted no back to subprime era. holy cow.
There will be a lot of buyers in 2010-2013 waiting their turns to clear their units to avoid SSD.
Are you one of them, if not how you know.
Tell you a story.
There was this Ang Mo go Geylang and saw the Durian. He tell everyone the Durian price going to drop because it so smelly nobody will buy.
Do you think people will believe him.
haig 162. 120k below valuation.. 670k, cheap..?
http://www.propertyguru.com.sg/listing/16599511/for-sale-haig-162
Serious, I love gardening, my colleague retire end of last year 2013, now staying in JB landed.
Almost brought a 2 Bedroom in JB but CIMB chicken out last minute so sad.
So have you shortlisted any areas in JB? R u also planning to retire soon?
Arachon
have I mistaken or are you the guy who lives and works in France ?
8 Rue Michel Labarthe
33260 La Teste-de-Buch
France
https://www.google.com/maps/place/8+Rue+Michel+Labarthe/@44.6222256,-1.1382451,756m/data=!3m2!1e3!4b1!4m2!3m1!1s0xd549eabb1571513:0xcf1a4078444274c5
That's my personal view. i dont really need you to believe or need you to tell a story about durian. ;)
I am not a guru too, just an investor.
Some gurus did. Pleasant reading.
http://www.propertyguru.com.sg/property-management-news/2014/1/37121/4-reasons-why-2014-could-be-a-turbulent-year-for-s
Are you one of them, if not how you know.
Tell you a story.
There was this Ang Mo go Geylang and saw the Durian. He tell everyone the Durian price going to drop because it so smelly nobody will buy.
Do you think people will believe him.
That's my personal view. i dont really need you to believe or need you to tell a story about durian. ;)
I am not a guru too, just an investor.
Some gurus did. Pleasant reading.
http://www.propertyguru.com.sg/property-management-news/2014/1/37121/4-reasons-why-2014-could-be-a-turbulent-year-for-s
Hope you don't mind, than you must be the COW, they called herd instinct.
If only life is so simple 1+1=2
Ask you one question. COV go down, Valuation go down or up.
You must be a cow lover and still bullish about the property market.
Good for you. Keep it up. :cheers1:
Hope you don't mind, than you must be the COW, they called herd instinct.
If only life is so simple 1+1=2
You must be a cow lover and still bullish about the property market.
Good for you. Keep it up. :cheers1:
I like COW, their shit very good for gardening. This part of France got more horse than COW, they use Horse shit also very good for plant.
https://fbcdn-sphotos-e-a.akamaihd.net/hphotos-ak-prn1/t1/558109_3758957845419_1610527765_n.jpg
Didnt know you are also shit lover.
I like COW, their shit very good for gardening.
So have you shortlisted any areas in JB? R u also planning to retire soon?
No.
Got to burn away my life for another few more years till my son finish his study.
He got 1 more year in NS than got to study for a few more.
No choice got to stay here in France to burn away my life and do gardening, drink cheap wine and eat Baguette
http://www.auchan.fr/jardin/achat1/15400
http://upload.wikimedia.org/wikipedia/commons/7/73/Morning_baguettes.jpg
Arachon
have I mistaken or are you the guy who lives and works in France ?
he lives in france and his PROPERTY is working for him...:D:D:D
go jb u can have best of both worlds....baguette witn this...
http://3.bp.blogspot.com/-QERV85jS9PA/TmblyDnQAaI/AAAAAAAAOAY/8iv7IHZdzj4/s800/Mutton+Soup+2.jpg
10 more minutes bell ring can go home eat dinner. After looking at the photo become very hungry
http://www.practicalscrappers.com/wp-content/uploads/2014/02/Vector-of-a-Cartoon-Hungry-Piranha-Fish-coloring-page-470x300.jpg
proud owner
13-03-14, 00:45
oh I love baguette ...
so you call those Epi baguette ? the leafy looking type ...
most weekend I have breakfast at Le Pain Quotidien
whenever we have visitors from Singapore ...my wife will take them there ..
oh I love baguette ...
so you call those Epi baguette ? the leafy looking type ...
most weekend I have breakfast at Le Pain Quotidien
whenever we have visitors from Singapore ...my wife will take them there ..
Don't know what they call, always go in point and pay (can't speak french, too old to learn). I think I need to try all of them, being here for the last 7 years.
https://www.youtube.com/user/LePainQuotidienLive
https://fbcdn-sphotos-f-a.akamaihd.net/hphotos-ak-prn2/t31/1888909_10202268420884854_213659359_o.jpg
https://scontent-b-lhr.xx.fbcdn.net/hphotos-frc3/t31.0-8/10001180_10202268433365166_1779190503_o.jpg
https://fbcdn-sphotos-a-a.akamaihd.net/hphotos-ak-frc1/t31/1960789_10202268446605497_1110309813_o.jpg
https://fbcdn-sphotos-g-a.akamaihd.net/hphotos-ak-ash3/t31/1960851_10202268446645498_2077458074_o.jpg
https://fbcdn-sphotos-f-a.akamaihd.net/hphotos-ak-ash3/t31/1016003_10202268475446218_1141204082_o.jpg
https://fbcdn-sphotos-h-a.akamaihd.net/hphotos-ak-prn2/t31/1795339_10202268477686274_847540042_o.jpg
https://fbcdn-sphotos-b-a.akamaihd.net/hphotos-ak-prn1/t31/1614493_10202268478766301_1654389789_o.jpg
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