Arcachon
16-11-21, 18:20
A Brief History of HDB COV
Weirdly enough, buyers and sellers in the HDB resale market in the past would negotiate using COV as a benchmark instead of using the official valuation as a guide.
HDB resale sellers would get the valuation of their flat first, and then negotiated with buyers over COV. Needless to say, this resulted in sharp price hikes.
In 2011, COV prices had reached a dizzying high – a buyer of a resale flat could end up paying a COV as high as $36,000. One maisonette unit in Bishan had a COV of $250,000 and became one of the first HDB flats to exceed a price of $1 mil.
Some Singaporeans started worrying that housing would be unattainable for future generations due to the rising prices. Yet others said the system should continue – after all, most still want to profit from their flat. And if a buyer is willing to pay more than the value, why not?
Then in March 2014, HDB decided to get rid of COV and stopped publishing COV prices. Additionally, a new system was put in place whereby prices of flats are negotiated among buyers and sellers first before the COV is made known.
Only once the price is decided on and the buyer pays the Option to Purchase (OTP) fee, will they get an official valuation from HDB. The difference between the offered price and the actual valuation becomes the COV.
This, of course, can be tricky for both buyers and sellers – especially those that are uninformed – since they don't know the actual valuation of the flat. So for example, say if you and the seller decided to settle at a price of $500,000 but the actual value of the flat is $490,000, it would mean that you'll have to forfeit $10,000.
However, if the actual value is $520,000, it means that you saved $20,000 and got yourself a steal.
This new policy worked; by 2015, the median COV prices had fallen close to $32,000. A year later, almost 80% of all resale HDB flat transactions were sold without COV. Today, COVs are a rare occurrence.
https://scontent.fsin4-1.fna.fbcdn.net/v/t39.30808-6/257764625_416741663284557_7692283459705677769_n.jpg?_nc_cat=101&ccb=1-5&_nc_sid=8bfeb9&_nc_ohc=ncmnGs8sER0AX-NGNWc&tn=II3kf1OWJjxxiYp_&_nc_ht=scontent.fsin4-1.fna&oh=6d4eb8494839dd736f19f776733ed337&oe=61979FF0
https://scontent.fsin4-1.fna.fbcdn.net/v/t39.30808-6/256749079_10222532379871164_2348487083028787492_n.jpg?_nc_cat=102&ccb=1-5&_nc_sid=dbeb18&_nc_ohc=douFJj01DXkAX__4Tg2&_nc_oc=AQmrbjULgbYV3IqmN8YOIsU4WEVckRLWdUZhIGISRFg7cWW1NsLEfuQo-CJ6XzgAZ0A&_nc_ht=scontent.fsin4-1.fna&oh=a52b55f5c156606ac4909d65bcaa2a9e&oe=6197BEA7
Weirdly enough, buyers and sellers in the HDB resale market in the past would negotiate using COV as a benchmark instead of using the official valuation as a guide.
HDB resale sellers would get the valuation of their flat first, and then negotiated with buyers over COV. Needless to say, this resulted in sharp price hikes.
In 2011, COV prices had reached a dizzying high – a buyer of a resale flat could end up paying a COV as high as $36,000. One maisonette unit in Bishan had a COV of $250,000 and became one of the first HDB flats to exceed a price of $1 mil.
Some Singaporeans started worrying that housing would be unattainable for future generations due to the rising prices. Yet others said the system should continue – after all, most still want to profit from their flat. And if a buyer is willing to pay more than the value, why not?
Then in March 2014, HDB decided to get rid of COV and stopped publishing COV prices. Additionally, a new system was put in place whereby prices of flats are negotiated among buyers and sellers first before the COV is made known.
Only once the price is decided on and the buyer pays the Option to Purchase (OTP) fee, will they get an official valuation from HDB. The difference between the offered price and the actual valuation becomes the COV.
This, of course, can be tricky for both buyers and sellers – especially those that are uninformed – since they don't know the actual valuation of the flat. So for example, say if you and the seller decided to settle at a price of $500,000 but the actual value of the flat is $490,000, it would mean that you'll have to forfeit $10,000.
However, if the actual value is $520,000, it means that you saved $20,000 and got yourself a steal.
This new policy worked; by 2015, the median COV prices had fallen close to $32,000. A year later, almost 80% of all resale HDB flat transactions were sold without COV. Today, COVs are a rare occurrence.
https://scontent.fsin4-1.fna.fbcdn.net/v/t39.30808-6/257764625_416741663284557_7692283459705677769_n.jpg?_nc_cat=101&ccb=1-5&_nc_sid=8bfeb9&_nc_ohc=ncmnGs8sER0AX-NGNWc&tn=II3kf1OWJjxxiYp_&_nc_ht=scontent.fsin4-1.fna&oh=6d4eb8494839dd736f19f776733ed337&oe=61979FF0
https://scontent.fsin4-1.fna.fbcdn.net/v/t39.30808-6/256749079_10222532379871164_2348487083028787492_n.jpg?_nc_cat=102&ccb=1-5&_nc_sid=dbeb18&_nc_ohc=douFJj01DXkAX__4Tg2&_nc_oc=AQmrbjULgbYV3IqmN8YOIsU4WEVckRLWdUZhIGISRFg7cWW1NsLEfuQo-CJ6XzgAZ0A&_nc_ht=scontent.fsin4-1.fna&oh=a52b55f5c156606ac4909d65bcaa2a9e&oe=6197BEA7