Private home owners paid highest COV in Q4: Khaw

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Published January 19, 2012

Private home owners paid highest COV in Q4: Khaw

They paid $45,000 while singles paid lowest median COV of $31,000

By UMA SHANKARI


PRIVATE property owners paid the highest median cash over valuation (COV) amount for resale HDB flats in the last quarter of 2011, National Development Minister Khaw Boon Wan said yesterday.

Writing in his blog under the heading 'Who Bids High?', Mr Khaw revealed that private property owners paid the highest median COV of $45,000 in the fourth quarter of 2011.

Second-timers paid $34,000, first-timers paid $33,000, permanent residents $32,000, and singles paid the lowest median COV of $31,000, according to Mr Khaw's data.

The issue of high COVs - which is the cash premiums paid to the seller above a flat's valuation - was raised in Parliament on Jan 16. Mr Khaw said then that former private property owners make up the buyer segment that is pushing up the COV, not permanent residents.

He released more data to support his point yesterday.

'We monitor HDB resale prices and publish them for information of potential buyers and sellers. Transparency helps make the market run better,' Mr Khaw wrote in his blog.

In response, property analysts said that data on the number and types of flats purchased by the respective groups would give a better understanding of the causes of high COVs.

For example, private property owners could be buying larger flats (such as four-room and five-room flats) and therefore the COV paid is higher in absolute terms, noted SLP International research head Nicholas Mak.

On the other hand, singles, who usually buy smaller HDB flats, are likely to pay a smaller COV for the smaller units.

Mr Mak added that HDB resale prices have been rising since 2002, while the information provided was only for Q4 2011. 'This snapshot of information is hardly enough to explain which group of buyers is contributing to the rise in COV,' he said.

ERA Realty Network's key executive officer Eugene Lim similarly noted that the data released by Mr Khaw is general and not flat-type specific. But it does show that private property owners are the ones paying higher COVs, he said.

'As private property prices are at an all-time high now, those that have cashed out would have easily made significant profits. So they have the capacity to pay higher COVs, especially for the larger flats that they usually buy (five-room or executive). The other group consists of those that have made profits from en-bloc sales,' Mr Lim said.

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'Cash-rich owners' pushing up HDB resale prices

Published on Jan 17, 2012

By Jessica Cheam, Housing Correspondent


DO NOT unfairly blame permanent residents (PRs) for pushing up the prices of HDB resale flats, National Development Minister Khaw Boon Wan urged Singaporeans yesterday.

He revealed that the buyers jacking up cash premiums for such homes were actually local private-property owners.

He was responding to a question in Parliament from Mr Zaqy Mohamad (Chua Chu Kang GRC), who asked if the Housing Board would consider limiting the sale of resale three-room and smaller flats to only lower-income Singaporeans.

Mr Zaqy told the House there was a common perception that the large proportion of PRs in the market had created competition, and that they had an influence on the cash premiums paid to the seller above a flat's valuation, known as cash-over-valuation (COV).

He said the COV for resale three-room flats was higher than those of four- and five-room resale units and that had priced some buyers out.

The HDB's latest data for the third quarter of last year showed that the median COV for three-room flats across the island ranged from $27,900 to $34,000.

The median COV was higher for four- and five-room flats - from $33,000 to $66,000 across the island.

Mr Khaw acknowledged the perception Mr Zaqy had referred to but said he often looked at the breakdown of prices in the resale market and the data was 'quite distinct'.

'Typically, the PRs pay the lower COVs... among the groups, the higher COVs are often by private-property owners, or former private-property owners... especially the en bloc owners or residents, probably with a lot of cash and still need a roof... They are the ones who bid up the COV,' he said.

'So let us not unfairly blame a particular group for causing higher prices in the resale market,' he added.

Mr Khaw said Singapore had to be fair to PRs too: 'They come here, they make a contribution to the economy and they need to live too. So offering them... the opportunity to buy a resale flat to stay... is a fair proposition.'

HDB resale flat prices have reached record highs in recent years, fuelling unhappiness among buyers unable to afford the asking amounts.

Mr Khaw noted that, in the last two or three years, prices had shot up due to an imbalance of supply and demand.

'All my efforts in the last seven months are to precisely attack this problem, and I think there are some initial results, so please be patient, the market will stabilise in due course,' he said.

Since taking over in May, Mr Khaw has directed the HDB to offer more new flats and in locations across the island, including mature estates. Recently, the board also raised the monthly income ceiling for new flats from $8,000 to $10,000 so more first-time buyers can get new flats.

Analysts said such moves had helped to ease some demand in the resale market.

Mr Khaw noted that the HDB imposed an income ceiling for new two- and three-room flats but not for resale units.

'Doing so will deprive flat owners of the full market value of their flats. We think this is not advisable,' he said.

He added that the HDB would try to exercise compassion where it could on the resale levy, paid by a second-time home buyer to the HDB to ensure a fair distribution of housing subsidies.

MPs Intan Azura Mokhtar (Ang Mo Kio GRC), Cedric Foo (Pioneer) and Zainudin Nordin (Bishan-Toa Payoh GRC) had noted that some families found it tough to pay this levy and asked if the HDB would consider waiving or reducing it for lower-income families buying their second subsidised HDB flat.

Mr Khaw said he was familiar with the concern and the HDB would 'assist where we can but, inevitably, cases differ from each other, so we really need to look at each individual case on its own merit'.

As for letting such families pay the levy - usually required in cash upfront - by monthly instalments or through the Central Provident Fund (CPF), he added that, in some cases, the HDB had included the levy in the price for the second subsidised flat so buyers could use both CPF as well as their housing loan to pay for it.

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Highest COVs paid by private property downgraders

Published on Jan 19, 2012

By Daryl Chin


NATIONAL Development Minister Khaw Boon Wan yesterday released figures to back up his argument that permanent residents are not to blame for pushing up the cost of resale flats.

Singaporeans who owned private property actually forked out the highest cash premiums over and above the official price in the last quarter, according to data on his blog.

Permanent residents came in fourth out of five groups compared by the minister. This is despite a common perception that they are making the market more competitive, which pushes up the cash premiums on resale units.

These payments, called cash-over-valuations (COV), are often put down by buyers competing to secure a flat.

According to Mr Khaw's data, private property owners paid the most in the last quarter - a median figure of $45,000. Next, at $34,000, were second-time buyers who had sold their first flat. First-timers paid $33,000.

Permanent residents came in fourth, at $32,000, only just above single buyers, who paid a median COV of $31,000.

The minister released the data to flesh out his answer to a question in Parliament on Monday. Mr Zaqy Mohamad, an MP for Chua Chu Kang GRC, had asked whether the Housing Board would consider changing the rules so that only lower-income Singaporeans could buy resale flats with three rooms or fewer.

Mr Khaw wrote on his blog that the Government can track the median COVs paid by different groups. He emphasised the importance of being transparent.

'We monitor HDB resale prices, and publish them for information of potential buyers and sellers,' he said. 'Transparency helps make the market run better.'

His data did not convince all experts, however. Some said more information was needed before a meaningful analysis could be made.

For example, it would help to know the types of flats bought by the five groups, said SLP International's Mr Nicholas Mak. 'Private property owners could be buying larger flats such as five-roomers, and therefore the COV paid is higher in absolute terms,' he said. 'Likewise, singles, who generally buy smaller flats, could be paying less COV.'

He added that resale prices have been rising steadily since 2002, and that more information was needed to help explain which of the groups has been contributing to this increase. 'The latest data only shows one quarter, it may not be reflective of all the quarters over the past few years,' he added.

Others, however, said the figures were not far off the mark. Mr Eugene Lim, key executive officer of ERA Realty, called for more specific information, such as a breakdown by flat types. But he said the data does reflect the feeling on the ground. Private property owners who have sold up due to the current high prices, or gone through a lucrative collective sale, may be able to afford to pay COVs of up to $100,000, he said.

PropNex chief executive Mohamed Ismail noted that permanent residents generally do not have as much in their Central Provident Fund (CPF) accounts as citizens: 'Many permanent residents are not CPF-rich, while Singaporeans, be they singles or newly married couples, do qualify for grants if they live near their parents, for example.'

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Second-timers to get more help

MINISTER for National Development Khaw Boon Wan will be shifting his attention to second-time home buyers.

The minister said in Parliament yesterday that this 'very big group with a wide range of needs' would be his focus for the next 12 to 24 months of his term.

Mr Khaw was responding to a question from Dr Intan Azura Mokhtar (Ang Mo Kio GRC) on whether the ministry would consider allowing the sale of HDB studio apartments to singles below the age of 55.

In his reply, the minister said the apartments' senior-friendly features and 30-year leases do not make them suitable for the housing needs of younger singles.

In response to a supplementary question by Dr Intan Azura on what could be done to help singles who are unable to afford high cash-over-valuations and private property, Mr Khaw described housing as a complex issue with many different groups of potential buyers.

After spending the first 12 months of his term on first-time buyers - a move which has delivered some results, he said - he would be moving on to second-time buyers.

In due course, he said, he would tackle other buyer groups, such as singles.

Asked by Mr Hri Kumar Nair (Bishan-Toa Payoh GRC) whether it was a good idea for elderly residents to monetise their current flats and buy studio apartments, Mr Khaw said it was a 'good option'.

He added that his ministry intends to expand the scheme, as application rates for studio apartments have been healthy, with 6,000 units launched so far.

MELISSA PANG