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Thread: Median COV for resale flats doubles in Q4

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    Default Median COV for resale flats doubles in Q4,00.html?

    Published January 23, 2010

    Median COV for resale flats doubles in Q4

    Resale prices hit record, with the HDB resale price index rising to 150.8 points, up 3.9% from the previous quarter


    CASH is king, and this adage rang particularly true in the public housing market in Q4 2009, when the cash premium for Housing & Development Board (HDB) flats doubled from the previous quarter.

    The median cash over valuation (COV) for all resale transactions was $24,000 - up from $12,000 in Q3. Nevertheless, the Q4 figure remains some way off from the record in HDB's books, which was $42,000 in Q3 1996.

    Resale flat prices also peaked in Q4 2009. The HDB resale price index rose to 150.8 points, up 3.9 per cent from the previous quarter and 8.2 per cent from the previous year. The increases surpassed HDB's flash estimates slightly, which projected growth at 3.8 per cent quarter-on-quarter and 8.1 per cent year-on-year.

    On the back of a strong housing market, HDB will be pushing out 6,900 flats in H1 2010, spread across areas such as Sengkang, Sembawang, Punggol, Yishun and Jurong West. There will also be monthly launches of build-to-order (BTO) flats for the next few months.

    The sharp rise in COV, or the amount of cash buyers pay above flats' valuations, caught the attention of several industry watchers. COVs indicate that buyers see greater worth in the flats than professional valuers do, and this happens especially in a rising market. In Q4, 93 per cent of resale deals occurred above valuation, compared with 79 per cent in Q3.

    Most observers attributed the high COVs to strong demand for flats, while supply remains limited. C&H Realty managing director Albert Lu believes there could have been some panic buying as well.

    HDB prices have risen in the last few quarters and with the economy expected to pick up this year, some home seekers could fear further price hikes, he said. 'That might have prompted them to say 'hey, better buy before prices go up again'.'

    Median COVs displayed the biggest increases for larger flats. It was $25,000 in Q4 for executive flats - 2.8 times the $9,000 in Q3. Median cash premiums of $50,000 were even seen in Clementi and Queenstown for this flat type.

    The good news for buyers is that COVs are unlikely to continue their steep rise, according to property consultants. HDB revealed that for the first half of this month, the median COV for all resale transactions has dipped slightly to $22,000.

    'With the resale HDB market trading at such high COVs, many buyers have become resistant and are exploring other options,' said ERA Asia Pacific associate director Eugene Lim. Some are thinking of buying smaller flats, delaying their purchases or joining the queue for new flats.

    He believes that COVs will continue inching up this year, though at a slower pace because 'we are not in very positive economic waters yet'. PropNex Realty CEO Mohamed Ismail does not expect the overall median COV to exceed $30,000 this year.

    Consultants are projecting HDB resale price growth of 5-10 per cent this year. In Q4, the median resale price of executive flats was $485,000 - those in Queenstown even achieved an eye-popping median price of $800,000.

    Buyers filed a total of 37,205 resale applications last year, up 31 per cent from 2008. There were 8,926 applications in Q4 2009 alone, though this was 23 per cent down from the previous quarter.

    Last quarters of the year tend to be quieter, and rising valuations and COVs could have contributed to the fall, Mr Ismail explained. 'Furthermore, the steady launch of new BTO projects, the government's continued assurance of more BTO projects in the pipeline and the increased chances for first-time buyers of BTO flats have all helped to assuage demand.'

    HDB recently offered 1,300 flats from two BTO projects in Choa Chu Kang and Hougang and the flats drew a flood of applications. It also launched the tender of two executive condominium sites in Sengkang and Yishun which could yield about 900 units together.

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    Jan 23, 2010

    Cash premiums for HDB flats hit a high

    Q4 median COVs at $24,000, but have since dropped this month

    By Jessica Cheam

    BUYERS desperate to get into the public housing market are shelling out twice as much in cash top-ups for HDB resale flats as they did just a few months back.

    These cash premiums are known as the Cash-over-Valuation (COV), and refer to the amount a buyer has to pay above a flat's valuation set by a bank.

    High demand and tight supply drove the median COV paid to $24,000 in the fourth quarter of last year, according to fresh data from the Housing Board (HDB) yesterday.

    That is double the $12,000 median in the previous three months and breaks the COV record of $22,000 achieved in the fourth quarter of 2007.

    The buying frenzy seems to have abated a little since the new year. The HDB said yesterday that median COV has come down to $22,000 for the first half of this month.

    Analysts say COVs are being pushed to dizzying levels on the back of high demand from cash-rich buyers with immediate housing needs in a market with tight supply.

    And there is always a disparity between valuations and sellers' expectations in a hot market, said ERA Asia Pacific associate director Eugene Lim.

    'Valuation is lower than actual resale prices because it is based on past prices,' he said. 'Currently, the market is on the upswing and is therefore forward-looking; this explains the disparity,' he said.

    HDB's latest data showed resale prices rose 3.9 per cent in the last three months of last year to hit a fresh record, bringing the full year increase to 8.2 per cent.

    Private homes got in on the act as well with prices up 7.4 per cent in the same period, according to the Urban Redevelopment Authority (URA) yesterday.

    This builds on an increase of 15.8 per cent in the previous quarter and offsets the contraction of 18.8 per cent that occurred in the dismal first half of the year.

    The final tally saw private home prices rise 1.8 per cent for the whole of last year.

    The HDB's figures showed that about nine out of 10 sales - or 93 per cent - in the fourth quarter were done above valuation. This is up from 79 per cent in the third quarter.

    Ngee Ann Polytechnic real estate lecturer Nicholas Mak said this indicates that HDB resale prices could still rise as an increasing proportion of sales are done above valuation.

    'This could also fuel the HDB upgraders' demand for HDB flats and private properties in the months ahead,' he said.

    The new HDB figures are evidence of the price rally that began in the middle of last year. It tripled median COV from $3,000 in the second quarter to $12,000 in the third before the fourth's spectacular leap.

    Sales volume for the fourth quarter - a typically quieter period - declined by about 23 per cent to 8,926 transactions.

    But last year was still a bumper year compared with 2008, with the total number of resale transactions surging 31 per cent to 37,205. It was also 26 per cent up on 2007's sales numbers.

    PropNex chief executive Mohamed Ismail noted that the larger flat types commanded the largest jumps in COV. Five-room flats were up 150 per cent, while executive units rose 178 per cent in the fourth quarter.

    But the number of sales in these categories fell 34 per cent in the fourth quarter compared with those in the third quarter, while sales of smaller flats declined only 18 per cent.

    Such steep rises in COVs are not sustainable, say analysts. But given the continued high demand for public housing, they expect prices to rise by about 5 per cent to 10 per cent this year.

    With COVs so high, buyers have 'become resistant and are exploring other options, including buying smaller flats or delaying their purchases', said Mr Lim.

    Permanent resident Liu Li, 29, said she has given up trying to buy a resale flat and is now queuing for a new flat with her Singaporean husband under the HDB's build-to-order (BTO) scheme.

    The HDB said yesterday it will launch 12,000 BTO flats this year, or more if there is demand.

    'In total, the HDB is planning to offer 6,900 flats in (the first half of this year). The projects will have a good geographical spread over areas such as Sengkang, Sembawang, Punggol, Yishun and Jurong West,' it said in a statement.

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    Jan 23, 2010

    Cash-rich buyers pushing up prices

    HDB resale flats in established estates commanding the high Cash-over-Valuation premiums

    By Jessica Cheam

    CERTAIN popular public housing estates are commanding the biggest premiums from eager buyers.

    Fresh data from the Housing Board (HDB) yesterday showed that flats in established towns such as Queenstown, Marine Parade and Bukit Timah are pulling in the biggest cash top-ups.

    The difference between the bank's valuation and the actual price paid is known as the Cash-over-Valuation (COV).

    The median COV hit a record $24,000 in the fourth quarter across all towns islandwide and all flat types.

    In some central locations such as Bukit Timah, the overall median COV paid for flats trebled to $30,000 in the fourth quarter from the third quarter.

    Further out, even at suburban spots such as Punggol, median COV shot up 195 per cent to $28,000, while at sleepy Pasir Ris, it jumped 186 per cent to $20,000.

    Housing agents on the ground say cash-rich buyers - both locals and permanent residents (PRs) - are driving the recent rally in HDB resale flat prices and the resulting high COV levels. PRs are the only foreigners able to buy HDB flats.

    PropNex agent Wilson Low, 44, recently brokered a sale where a local couple paid $730,000 for a five-room flat on a high floor at Cantonment Close. That meant an eye-popping $85,000 COV.

    'The buyers, flush with cash from a private property en bloc sale, paid the whole sum without a bank loan. We are seeing quite a few such cash-rich buyers who are meeting the high demands of sellers,' he said.

    He said PRs, mostly from China, Malaysia and Indonesia, tend to favour central locations and are more serious buyers than locals, given their urgent need for housing.

    ERA Asia Pacific associate director Eugene Lim added that the resale market 'will continue to be driven by families who have immediate housing needs, namely the second-time buyers and PRs', for the near future.

    HDB's data showed median resale prices at central Queenstown hit $800,000 for executive flats and $645,000 for five-room flats, up from $712,000 and $619,000 in the third quarter respectively.

    Other notable prices were fetched at Clementi, where the median resale price for an executive flat was $690,000, and Marine Parade, where a five-room flat was $625,000.

    Monthly rents for HDB flats also inched up for all flat types in the fourth quarter from the third, except those for three-room units, which were flat at $1,500.

    Rents for four- and five-room flats both rose about 3 per cent to $1,750 and $1,850 respectively, while rents for executive units rose 2 per cent to $2,000 a month.

    HDB said yesterday that subletting transactions edged up by about 1 per cent to 3,902 cases in the fourth quarter, compared with those in the third.

    The number of HDB flats approved for subletting rose to about 24,300 units in the fourth quarter - up from 23,800 units in the third quarter.

    ERA's Mr Lim said COV is 'likely to continue to inch upwards in 2010 as we enter economic recovery'.

    'However, as we are not in very positive economic waters yet, COV increases are likely to moderate in the months to come,' he said.

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