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13-03-14, 13:33
http://www.straitstimes.com/archive/friday/premium/top-the-news/story/median-cov-hdb-flats-hits-zero-8-year-low-20140307
Median COV for HDB flats hits zero - an 8-year low
Published on Mar 07, 2014
By Janice Heng And Rachel Au-Yong
THE median cash premium for Housing Board resale flats hit zero last month, a threshold which experts believe cements the fact that this is a buyers' market.
The eight-year-low Cash Over Valuation (COV) mark is expected to slide even further, as a glut of upgraders who bought condominium units and new flats are expected to sell their homes this year and next.
"The pace of decline might pick up," noted Century21 chief executive Ku Swee Yong.
The new low will also lead buyers to "increasingly view 'valuation price' as the highest offer", added R'ST Research director Ong Kah Seng.
Resale prices also slid 1.8 per cent, more than reversing the marginal 0.3 per cent rise in January, Singapore Real Estate Exchange (SRX) flash figures showed yesterday. It was the sharpest monthly fall since the decline began last April, bringing prices down to the level they were at in June 2012.
Completing the lacklustre picture was the low number of deals: 734 flats changed hands, down from 918 in January and 783 a year before.
The rental market was similarly muted: 1,118 flats were rented last month, down from 1,496 in January and 1,296 a year before. But the median rent edged up to $2,350 a month from $2,300.
As loan curbs introduced last August continue to dampen the market, a median COV of zero is no surprise, said experts. "Nowadays buyers don't even talk about COV; they talk about 'CUV', cash under valuation," said OrangeTee head of research Christine Li.
Twelve HDB towns had zero or negative median COV, most of them non-mature ones. In Sengkang, for instance, 20 deals - about 70 per cent of that month's total - closed below valuation.
Two mature estates, Geylang and Tampines, also had median COVs of zero.
Of all the deals for which SRX had valuation data, 37.3 per cent saw negative COVs.
But analysts also noted that COVs depend on valuations - which are set to fall, as they are based on recent transactions.
The new valuations might then be low enough that buyers do not press for negative COVs.
Demand may also increase in the light of zero COVs, said Chris International director Chris Koh, easing the downward pressure.
Still, there are exceptions. In February, a five-room flat in Clementi went for $110,000 over valuation. In Bishan, the median executive flat COV was $61,500. "Flats with good attributes such as being near an MRT station will be able to hold their prices reasonably well," said ERA Realty key executive officer Eugene Lim.
While the low COV trend has fuelled industry talk about scrapping the system, Mr Ong thinks this might be unwise. The COV, he noted, was introduced partly to discourage buyers from committing to overly high prices, as they have to pay a large cash amount. "Had it not been for COV acting as a brake for irrational buying then, resale flat prices might be even higher," he said.
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Median COV for HDB flats hits zero - an 8-year low
Published on Mar 07, 2014
By Janice Heng And Rachel Au-Yong
THE median cash premium for Housing Board resale flats hit zero last month, a threshold which experts believe cements the fact that this is a buyers' market.
The eight-year-low Cash Over Valuation (COV) mark is expected to slide even further, as a glut of upgraders who bought condominium units and new flats are expected to sell their homes this year and next.
"The pace of decline might pick up," noted Century21 chief executive Ku Swee Yong.
The new low will also lead buyers to "increasingly view 'valuation price' as the highest offer", added R'ST Research director Ong Kah Seng.
Resale prices also slid 1.8 per cent, more than reversing the marginal 0.3 per cent rise in January, Singapore Real Estate Exchange (SRX) flash figures showed yesterday. It was the sharpest monthly fall since the decline began last April, bringing prices down to the level they were at in June 2012.
Completing the lacklustre picture was the low number of deals: 734 flats changed hands, down from 918 in January and 783 a year before.
The rental market was similarly muted: 1,118 flats were rented last month, down from 1,496 in January and 1,296 a year before. But the median rent edged up to $2,350 a month from $2,300.
As loan curbs introduced last August continue to dampen the market, a median COV of zero is no surprise, said experts. "Nowadays buyers don't even talk about COV; they talk about 'CUV', cash under valuation," said OrangeTee head of research Christine Li.
Twelve HDB towns had zero or negative median COV, most of them non-mature ones. In Sengkang, for instance, 20 deals - about 70 per cent of that month's total - closed below valuation.
Two mature estates, Geylang and Tampines, also had median COVs of zero.
Of all the deals for which SRX had valuation data, 37.3 per cent saw negative COVs.
But analysts also noted that COVs depend on valuations - which are set to fall, as they are based on recent transactions.
The new valuations might then be low enough that buyers do not press for negative COVs.
Demand may also increase in the light of zero COVs, said Chris International director Chris Koh, easing the downward pressure.
Still, there are exceptions. In February, a five-room flat in Clementi went for $110,000 over valuation. In Bishan, the median executive flat COV was $61,500. "Flats with good attributes such as being near an MRT station will be able to hold their prices reasonably well," said ERA Realty key executive officer Eugene Lim.
While the low COV trend has fuelled industry talk about scrapping the system, Mr Ong thinks this might be unwise. The COV, he noted, was introduced partly to discourage buyers from committing to overly high prices, as they have to pay a large cash amount. "Had it not been for COV acting as a brake for irrational buying then, resale flat prices might be even higher," he said.
[email protected]
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