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reporter2
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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reporter2
13-03-14, 14:54
http://www.businesstimes.com.sg/archive/friday/premium/top-stories/resale-flat-covs-fall-zero-first-time-2006-20140307

Published March 07, 2014

Resale flat COVs fall to zero for first time since 2006

Almost two in five HDB deals close below valuation

By Lynette Khoo [email protected]


[SINGAPORE] For the first time in nearly a decade, the overall median cash-over-valuation (COV) for resale HDB flats hit ground zero last month, compared with $3,000 in January, as demand for resale public homes softened.

Almost two in five HDB deals closed below valuation, making up 37.3 per cent of HDB resale deals, up from 29.4 per cent in January, based on transaction records from agencies registered with the Singapore Real Estate Exchange (SRX).

Flash estimates by SRX also showed HDB resale prices marking a sharpest month-on-month fall of 1.8 per cent since prices began declining in April 2013, while resale volume dropped 20 per cent from a month ago to 734 deals.

Twelve out of 26 HDB towns saw zero or negative median COV. This is an increase from eight HDB towns in January that saw zero or negative COV.

Bukit Panjang, Punggol, Sembawang, Sengkang and Woodlands led the drop with negative overall median COVs recorded in February. Bedok, Bukit Batok, Choa Chu Kang, Geylang, Jurong West, Tampines and Yishun had zero overall median COV.

With COVs for resale flats falling to zero for the first time since 2006 when SRX began collecting COV records, some analysts are predicting that COVs will slip into negative territory as early as this month.

"Recent policies have shut down the heavy demand for HDB resale flats from foreigners and on top of that, there may be some pressures from those selling their HDB flats to upgrade to their private properties when these are completed," said Alan Cheong, director for research and consultancy at Savills Singapore.

The three-year waiting period for permanent residents (PRs) to buy resale flats has been a major turn-off for many PRs and the tightening of PR renewals has also resulted in fewer people being eligible for HDB resale flats.

If traditionally hot estates such as Bishan, Queenstown and Toa Payoh start seeing zero or negative COVs, that would be a "time of reckoning", Mr Cheong said.

Ong Kah Seng, director of R'ST Research, said he expects zero COV for flats with no more than four rooms in average locations such as Sengkang, Punggol, Hougang and Serangoon.

Larger flats (five-room and executive flats) in average locations and flats in far-flung areas, such as Bukit Batok, Sembawang, Woodlands and Jurong West, are likely to be transacted at slightly below valuation price, Mr Ong predicted.

A negative or zero COV will be a psychological barrier to sellers, he said. "Only sellers in a hurry to dispose of their flat, such as moving into completed BTO flat, or executive condominium, or who really want to sell off their flat after they move into their new completed private condominium, will relent to notable resale price at below valuation price."

Mr Ong believes prices may fall by around 5 per cent for the first half of 2014 before they stabilise. When demand picks up from the middle of 2014, sellers may not raise their prices aggressively in view of the 30 per cent cap for the mortgage servicing ratio (MSR) on buyers.

But analysts note that the weakness in the HDB resale market will not necessarily spill over to the private residential market.

ERA Realty key executive officer Eugene Lim said he does not foresee a spillover effect in private home sales since half of private home buyers already have private addresses.

While there will likely be more deals closed at or below valuation as sellers become more realistic, Mr Lim said he prefers to wait for further clarity in figures for the second quarter of this year as February is traditionally a slow month because of the Chinese New Year.

Mr Ong of R'ST Research noted that loan limit under the total debt servicing ratio (TDSR) framework has a greater bearing on private residential demand.

HDB upgraders generally have the option of renting out their flat to foreigners or go for more affordable executive condominiums, he said.

Arcachon
13-03-14, 15:01
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.