By SUSAN TEO
Cash-Over-Valuation (COV) is defined as “the difference between the resale price and the market value of the flat” (HDB) that is paid by the buyer upfront. While not compulsory for HDB resale transactions, it is common in most transactions. The amount is negotiable between the buyer and seller, however if the resale price is “at or below the market valuation of the flat, there is no need for buyer to pay any COV.” COV was legalised because of illegal 'under counter cash payment', but there have been calls to have it scrapped as some argue that it ratchets up resale prices. This has been refuted by HDB (HDB Speaks).
For this year,
reports show that the median COV finally showed an uptick, after falling
for three consecutive quarters. The Singapore Real Estate Report (SRX)
for Q3 2012 reveals a 15 percent quarter-to-quarter increase, with the
median COV for this quarter standing at $30,000 up from the second
quarter of $26,000. As can be seen from Table 1 and Table 2, there has
been a quarter-to-quarter decline across all four housing types from 4Q
2011 to 2Q 2012, with the exception of 5-room and executive flats in 2Q
2012.
Cash-Over-Valuation (COV) is defined as “the difference between the resale price and the market value of the flat” (HDB) that is paid by the buyer upfront. While not compulsory for HDB resale transactions, it is common in most transactions. The amount is negotiable between the buyer and seller, however if the resale price is “at or below the market valuation of the flat, there is no need for buyer to pay any COV.” COV was legalised because of illegal 'under counter cash payment', but there have been calls to have it scrapped as some argue that it ratchets up resale prices. This has been refuted by HDB (HDB Speaks).
Table
1: Overall (Average for the 26 Districts) Median COV
| 3-Room | 4-Room | 5-Room | Executive | |
| 3Q 2011 | $31,094 | $40,245 | $46,571 | $56,363 |
| 4Q 2011 | $28,341 | $36,200 | $41,800 | $46,000 |
| 1Q 2012 | $23,171 | $30,070 | $32,994 | $37,767 |
| 2Q 2012 | $22,950 | $29,543 | $35,145 | $39,769 |
| 3Q 2012 | $25,942 | $33,430 | $39,479 | $40,700 |
Source:
Compiled using data from HDB Median
Cash-Over-Valuation (COV)
Table
2: Quarter-to-Quarter Percentage Change in Median COV
| 3-Room | 4-Room | 5-Room | Executive | |
| 4Q 2011 | -8.9 | -10.1 | -10.2 | -18.4 |
| 1Q 2012 | -18.2 | -16.9 | -21.1 | -17.9 |
| 2Q 2012 | -1.0 | -1.8 | 6.5 | 5.3 |
| 3Q 2012 | 13.0 | 13.2 | 12.3 | 2.3 |
Source:
Compiled using data from HDB Median
Cash-Over-Valuation (COV)
Since HDB
scrapped its practice of releasing overall nationwide COV figures and
“overall median COV figures for different housing estates and flat
types” (Chin) in July 2011, the public has to rely on the median COV for
each housing type in the different districts. HDB had been providing
the former since the second quarter of 2007, but decided to stop because
it adds little informational value for house buyers and sellers in
their sales decision.
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
References
1. Chin, Daryl, “HDB to stop releasing overall nationwide COV figures”, The Straits Times 23 July 2011, Print
2. Wong Wei Han, “COV Prices Rise After 9-month Decline”, TODAY (Singapore) 6 October 2012, Print
3. HDB, “Median Cash-Over-Valuation (COV) by Town and Flat Type”, Web
<http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatMedianCOV?OpenDocument>
4. HDB Speaks, “Why Can’t HDB Scrap the Practice of Paying Cash-Over-Valuation?” Web
<http://www.hdbspeaks.sg/fi10/fi10336p.nsf/cc/COV?OpenDocument>
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