The Straits Times reported yesterday that the median Cash-over-valuation (COV) for HDB flats hit a new high in the fourth quarter of 2009. COVs are cash premiums that a buyer has to pay over the bank’s valuation of the flat. Why do we have to pay a COV, you might ask.
Well, a bank’s valuation of the flat is usually lower than the actual resale prices because it’s based on past prices. If you’ve been following the news, the market’s now quite optimistic and sellers are more forward-looking.
According to the figures released, the highest median COV (among all flat types) was in Bukit Timah at $30,000. Executive flats in Clementi and Queenstown commanded a median COV of $50,000. The Straits Times highlighted a case where a local couple paid $85,000 COV for a five-room flat in Cantonment Close. This demand is driven by cash-rich buyers with immediate housing needs. And let’s face it, supply in Singapore is scarce.
If you think you can purchase a flat without paying COV, bear in mind that 93% of sales in the 4Q transacted above valuation. However, the median COV has stabilised recently to about $22,000.
If you’re wondering how much COV is being paid in your estate, you can check out HDB’s report. Here are the figures for the median resale prices in various estates. If you’re more interested in rental rates, you can get a feel of it at my listings site at agentfairent.wordpress.com.