A loan for COVs?

Not right for Govt to intervene, says Mah

by ESTHER FUNG [email protected]

Updated 09:50 PM Sep 15, 2009

IT HAS been the bane of cash-strapped househunters in the HDB resale market. One backbencher asked yesterday, is there no alternative to the cash-over-valuation (COV) system?

"Many people are CPF-rich but cash-poor when they want to buy a flat," said Member of Parliament Lim Wee Kiak (Sembawang GRC). "Could there be a separate mechanism to look at HDB or even the private sector providing a bridging loan for this COV, so as to help young couples overcome that barrier?" The COV is the amount a homebuyer must pay over the property's valuation.

Yesterday, several MPs repeated the call for the Government to do more to make it more affordable for Singaporeans, especially young couples, to buy a flat.

MP Lim Biow Chuan (Marine Parade GRC) said: "My parents bought their four-room flat in 1978 for less than $20,000 (Corrected at 09:30 PM Sep 15, 2009). Given that prices have increased so much compared to increases in income ... how would today's generation be able to afford that dream home?" According to HDB data for the second quarter, a four-room resale flat cost an average of $320,000.

While noting that prices have risen, Minister for National Development Mah Bow Tan said homebuyers need "to shop around, do your homework and remember also that not all COVs that buyers ask are realistic ones". He also noted that a third of transactions are done at zero COV.

"To expect the Government to ban COVs or to come in and impose itself in these transactions, I think is not the right thing to do," said Mr Mah.

As for gauging "affordability", the rule of thumb is, not more than 30 per cent of the monthly household income goes towards mortgage payments.

For instance, a household earning $2,000 monthly would be eligible for the additional housing grant of $35,000. The family can buy a $150,000, three-room flat in a non-mature estate. "Your monthly instalment is $460, (or) 23 per cent of your household income, well within the 30 per cent," said Mr Mah.

MP Liang Eng Hwa (Holland-Bukit Timah GRC) asked if there was sufficient supply of new flats, and if the current waiting time - about three years - could be shortened. Mr Mah's advice was that young couples should plan ahead and book a flat under the fiance/fiancee scheme. "There are ways and means of shortening this process and HDB is quite accommodating."