Good to move focus away from COV, say experts

[reporter2]

http://www.straitstimes.com/archive/...perts-20140311

Good to move focus away from COV, say experts

Published on Mar 11, 2014

By Janice Heng


REMOVING cash premiums during the negotiation stage of the buying of a Housing Board resale flat is unlikely to rock the market, experts said yesterday.

The reason is that these cash over valuation (COV) prices are now very low, with median COV hitting zero last month.

Sellers are thus less likely to protest, said SLP International Property Consultants director Nicholas Mak. Also, few buyers are likely to be caught out by low valuations, said Chesterton Suntec International director of research and consultancy Colin Tan.

Previously, a resale flat's valuation was obtained first, and buyers and sellers then negotiated on the premium or COV to pay.

In the new system that took effect yesterday, buyers and sellers agree on a price before getting a valuation from the HDB.

In a strong market, the risk is that the valuation may be much lower than the price, limiting the loan a buyer can get. But, in today's weak market, buyers know this is unlikely, said Mr Tan. "There will be less anxiety."

The exception is when buyers seek units in prime locations, which still fetch high COVs. The median COV for five-room flats in Queenstown, for instance, was $37,000 last month.

"(Such) buyers will become more cautious in their offer price as they enter into a purchase without an indication of how much the property is worth," said PropNex chief executive Mohamed Ismail Gafoor.

Such caution from buyers is what worries sales manager Joe Ng, 45, who is trying to sell his four-room flat in Serangoon.

"If (a buyer) proposes a price, he won't propose a market price, it's likely to be lower," he said.

And deals might not close if buyers are caught out, said ERA property agent J. A. Goh. "I foresee more cases of buyers backing out with this new system."

To avoid this risk, buyers may simply continue to rely on private valuations, such as from property firms, said Mr Ismail.

That is what sales executive Lee Choon Han, 37, plans to do as he searches for a flat in Alexandra, Redhill or Tiong Bahru. "I'll try to observe what the market trends are for valuation," he said.

Still, experts think the move will generally succeed in shifting the focus away from COVs.

"It's a good system. It gets the buyers and sellers back to talking about price," said ERA Realty key executive officer Eugene Lim.

The move could also make for a more stable market, said Mr Mak. In the old system, high COVs could cause buyers and sellers to expect continued high premiums, even as valuations rise.

This reinforces the upward trend and vice versa for low COVs. The new system "could help to stabilise the market away from self-reinforcing upswings or downswings", Mr Mak said.

But experts are divided over whether HDB resale prices themselves will be affected.

While Mr Ismail thinks buyers' caution could depress prices, others believe the current low COVs mean little will change. Prices may well fall in the private resale market instead, said GPS Alliance chief executive Jeffrey Hong.

"If HDB upgraders find it harder to offload their flats, they may be unable to upgrade at all," he said. Lower demand for mass-market private properties would then mean lower prices.

[email protected]

Additional reporting by Rachel Au-Yong, Maryam Mokhtar and Melissa Tan

[Arcachon]

How to get HDB valuation for SGD 1 OTP (Option Fee).

Just get TOM, DICK or Harry to sign the option, after valuation just let it expire.

Purchase Price $ 1,000,000 ("Purchase Price") (for HDB 2 Room)

Option Fee (Up to a maximum of $1,000) $ 1 ("Option Fee")

http://services2.hdb.gov.sg/webapp/B...4SPdfConverter

7. Non-Exercise of Option

If the Buyer does not exercise this Option in the manner stated in this Option, and provided the Seller has met the requirement in Clause 3.1 ----

(a) the Seller is entitled to retain the Option Fee SGD 1 OTP (Option Fee); and

(b) neither party will have any claim against the other.

[wt_know]

need to pay tom, dick or harry $100 angpow?
the unit is locked in from any other sale for 21 days

[Arcachon]

I know I can't change everyone, I know I can change one man at a time.

http://www.stproperty.sg/articles-pr...phole/a/156914

WITH few comparable transactions to go by, anxious sellers of rare units may try to exploit a loophole in new Housing Board rules, several property agents said.
The Straits Times - March 14, 2014
By: Rachel Au-Yong

WITH few comparable transactions to go by, anxious sellers of rare units may try to exploit a loophole in new Housing Board rules, several property agents said.

New rules dictate that only the buyer or his agent can apply for HDB-approved valuations after a price has been agreed with the seller. Sellers no longer get a copy as they do not need it in theory, unlike buyers who need it to apply for bank loans.

But while sellers of typical flats have plenty of transactions to take reference from, those selling rarer units may feel like they are fumbling in the dark without a valuation to guide asking prices.

"If a seller really wants to find out how HDB values his flat, he could just get a friend to pose as a buyer, get the valuation, then let the option lapse after 21 days," said ERA Realty agent J.A. Goh.

This may happen for unique flats such as the discontinued Design, Build and Sell Scheme flats, or the Pinnacle@Duxton, which will see its minimum occupancy period expire at the end of this year. "The Pinnacle is public housing but it's so unique that you can't exactly base prices on nearby HDB flats," Mr Goh said.

"Sellers may want peace of mind and find out what is reasonable from the HDB," he added.

Getting a friend or relative to pose as a buyer and getting an HDB-approved valuation is cheaper than going through private valuers. An HDB-approved valuation costs $191.90 for a three-room flat or larger, while private valuations can cost thousands of dollars. However, most are unlikely to resort to getting friends or family members to pass off as buyers.

"The prices of a typical unit are pretty standard," said Dennis Wee Realty agent Dennis Foo. "If you get a valuation just to 'be sure', you'll lock yourself out from a potential deal for the next 21 days. There's no point."

[jwong71]

I know I can't change everyone, I know I can change one man at a time.

http://www.stproperty.sg/articles-pr...phole/a/156914

WITH few comparable transactions to go by, anxious sellers of rare units may try to exploit a loophole in new Housing Board rules, several property agents said.
The Straits Times - March 14, 2014
By: Rachel Au-Yong

WITH few comparable transactions to go by, anxious sellers of rare units may try to exploit a loophole in new Housing Board rules, several property agents said.

New rules dictate that only the buyer or his agent can apply for HDB-approved valuations after a price has been agreed with the seller. Sellers no longer get a copy as they do not need it in theory, unlike buyers who need it to apply for bank loans.

But while sellers of typical flats have plenty of transactions to take reference from, those selling rarer units may feel like they are fumbling in the dark without a valuation to guide asking prices.

"If a seller really wants to find out how HDB values his flat, he could just get a friend to pose as a buyer, get the valuation, then let the option lapse after 21 days," said ERA Realty agent J.A. Goh.

This may happen for unique flats such as the discontinued Design, Build and Sell Scheme flats, or the Pinnacle@Duxton, which will see its minimum occupancy period expire at the end of this year. "The Pinnacle is public housing but it's so unique that you can't exactly base prices on nearby HDB flats," Mr Goh said.

"Sellers may want peace of mind and find out what is reasonable from the HDB," he added.

Getting a friend or relative to pose as a buyer and getting an HDB-approved valuation is cheaper than going through private valuers. An HDB-approved valuation costs $191.90 for a three-room flat or larger, while private valuations can cost thousands of dollars. However, most are unlikely to resort to getting friends or family members to pass off as buyers.

"The prices of a typical unit are pretty standard," said Dennis Wee Realty agent Dennis Foo. "If you get a valuation just to 'be sure', you'll lock yourself out from a potential deal for the next 21 days. There's no point."

If you get a valuation just to 'be sure', you'll lock yourself out from a potential deal for the next 21 days.

and if the market is in its downwards spiral, end up with lower valuation and prices.

LPPL

[wt_know]

i believe when a seller want to sell his unit, he already got a 'price' in his heart

even before rule change, if valuation is $500k
he could have already decided the final price is $550k
it just that now without the valuation report on hand, see who blink first
even before rule change, if no buyer, even with valuation report, seller might blink first and news will report big big sell below valuation

[eng81157]

If you get a valuation just to 'be sure', you'll lock yourself out from a potential deal for the next 21 days.

and if the market is in its downwards spiral, end up with lower valuation and prices.

LPPL

this isn't a stock market, prices won't swing violently. anyway, resale prices will be published daily. so unless the seller's unit is exceptionally unique, you can probably get a good gauge from the HDB list