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All You Need to Know About HDB Cash Over Valuation (COV) in 2024


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Cash over valuation (COV) is the amount paid above the official HDB valuation for a resale flat. (You can get a free indicative valuation here.) This additional sum is paid in cash by the buyer and cannot be covered by loans or grants. Data from the 1st quarter of 2024 indicates that around 15% of resale flat buyers paid COV, which marks a slight increase compared to the last quarter of 2023 but is significantly lower than the peak observed in early 2022.

What is Cash Over Valuation (COV)?

Cash Over Valuation (COV) is a term specific to Singapore’s HDB resale market. It refers to the amount of money a buyer pays above the HDB’s official valuation of a resale flat. This additional sum is paid in cash and cannot be financed through loans or grants.

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For example, if the HDB values a flat at $500,000 but the agreed-upon selling price is $530,000, the COV would be $30,000.

HDB COV DefinitionAmount paid above HDB’s official valuation in cash.
LocationsMore prevalent in mature estates and for flats with desirable attributes.
Buyer ProfileBuyers with urgent housing needs, seeking specific features, and willing to pay a premium.
Impact on MarketContributes to rising resale prices and increased competition among buyers.
Relationship with Cooling MeasuresPotentially affected by cooling measures, as buyers might be more cautious about overpaying.

How is COV Determined?

The HDB valuation is a benchmark that assesses a flat’s worth based on factors like location, size, age, condition, and prevailing market conditions. It is not the final selling price, and buyers and sellers can negotiate above or below this valuation.

COV comes into play when the agreed-upon selling price exceeds the HDB valuation. This excess amount becomes the COV, which the buyer must pay in cash.

Why Does COV Exist?

COV exists due to the dynamics of supply and demand in the HDB resale market. When demand for certain flats outstrips supply, buyers may be willing to offer COV to secure their desired property. Factors like location, flat type, amenities, and renovations can all influence a buyer’s willingness to pay COV.

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The amount of COV paid varies depending on location, flat type, and individual negotiations. It can range from a few thousand dollars to over $100,000 in some cases.

According to HDB’s flash estimates, HDB resale prices increased by 4.8% in the first quarter of 2024. While this growth rate has moderated compared to the double-digit increases seen in 2022, it still indicates a competitive market where COV can occur.

4 Factors Contributing to HDB COV

1. Strong Demand for Resale Flats

The demand for resale flats remains robust, driven by factors like longer waiting times for Build-To-Order (BTO) flats and a preference for established estates with readily available amenities.

The supply of resale flats in certain mature estates remains tight, leading to increased competition among buyers and a willingness to pay a premium.

3. Rising Resale Prices

HDB resale prices have been on an upward trajectory, fueled by low-interest rates and strong demand. This has created an environment where buyers are more willing to offer COV to secure their desired flats.

4. Million-Dollar HDB Transactions

The increasing number of million-dollar HDB transactions indicates a willingness among some buyers to pay a premium for well-located and well-maintained flats, even if it means exceeding the HDB valuation.

How Does COV Affect HDB’s Appreciation?

COV does not directly affect a flat’s appreciation potential. The HDB valuation, which is based on factors like location, size, and prevailing market conditions, is the primary determinant of a flat’s long-term value.

However, paying COV can impact a buyer’s immediate finances and potentially reduce their overall returns if the flat does not appreciate as expected. It is crucial for buyers to carefully consider their budget and conduct thorough research before deciding to pay COV.

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Yes, COV is legal in Singapore. While it was more prevalent before 2014 (when the OTP did not rely on the HDB valuation), recent trends suggest that buyers still fork out COV to this day.

Tips for Buyers

  • Research: Thoroughly research the recent transacted prices of similar flats in the same area to understand the prevailing market conditions and negotiate a fair price.
  • Professional Advice: Seek professional advice from a real estate agent who can provide valuable insights and guidance on market trends and pricing strategies.
  • Financial Prudence: Carefully consider your budget and avoid overextending yourself financially by paying an excessive COV.

Tips for Sellers

  • Realistic Pricing: Set a realistic asking price based on the HDB valuation and recent transacted prices of comparable flats. (You can get a free indicative home valuation here.)
  • Patience: Be patient and wait for the right buyer who is willing to pay a fair price for your flat.
  • Transparency: Be transparent with potential buyers about the reasons for your asking price and any COV expectations.

COV is a complex issue with both advantages and disadvantages for buyers and sellers. As the Singapore property market continues to evolve, it is essential for all parties to stay informed about COV trends and make well-informed decisions based on their individual circumstances and financial goals.

By understanding the factors influencing COV and seeking professional guidance, buyers and sellers can navigate the HDB resale market with confidence and achieve their desired outcomes.

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