HDB Urges Caution

Cash-over-Valuation making headline again. Stories of $50K to $100K COV give news organisation added sensations. First, it did not happen. Second, if such transactions do occur, they do not represent the entire HDB Resale activities. Genuine buyers and sellers should not get emotionally excited. Latest Prices is our attempt to aggregate/source actual resale transactions. However success depends on your willingness to share.

Source: Channel News Asia

Housing analysts said it is a sellers’ market right now, with resale flats being a hot commodity lately.

But the Housing and Development Board (HDB) has urged buyers to exercise caution when paying high cash premiums, and to do their homework to determine if a house is truly worth its asking price.

A 4-room flat in Bishan was recently put up for sale. It was valued at S$460,000 by an independent valuer appointed by HDB, and the owners are asking for an additional S$100,000 cash-over-valuation (COV). The owners, who declined to be named, are a young couple in their 30s who run an F&B business. They claimed to have received three offers so far, but all were rejected.

“The COV is too low. There are those who are asking for S$50,000 to S$60,000. There was one offer which was close, about S$95,000. We are not in urgent need to sell. In a way, it’s to test the market. If we sell, we sell. If we don’t sell, we will just continue to stay,” said the owner of the 4-room flat in Bishan. Analysts said with a continued strong demand for resale flats, owners are taking advantage of the situation to increasingly ask for higher prices.

Based on the latest HDB figures, 78 per cent of home sales transacted in the third quarter of last year were above valuation. That is a 22 percentage-point jump from the second quarter of last year’s figure of 57 per cent. The median COV is also on the rise – jumping from S$3,000 in the second quarter to S$12,000 in Q3. With HDB resale flat prices hitting an all-time high, housing agents said most flats now command at least S$20,000 to S$30,000 cash-over-valuation.

Units situated at good locations, close proximity to an MRT station and good renovation can see COV go up to S$50,000 to S$70,000. But there is a limit to how much buyers are willing to pay. “If it’s not to my liking, then I’d have to do up, (renovate) it again. So how much (am I willing to pay)? About S$50 to S$60,000,” said one member of the public.

“It’s too high for me. Because of my income, I don’t think I can afford it,” said another.
HDB said only four out of the 13,000 4-room flats sold last year had premiums higher than S$70,000. Analysts cautioned against jumping into deals that require high cash premiums.

“COV is a premium. Five years down the line, the renovation will deteriorate. And there’s no guarantee that you can sell at S$100,000 above the then value. Therefore, buyers should exercise discretion as far as how high you want to pay,” said Mohamed Ismail, CEO of PropNex.

HDB said it does not control resale flat prices as they are the result of negotiations between willing buyers and sellers. It added that intervening in COV means forcing people to buy and sell at fixed prices. HDB also urge buyers to have the relevant information before negotiating with sellers, and to offer a price within their means.

This site does not plug into HDB’s IT System and extract real time resale transaction prices. We request for info from buyers, sellers and agents upon the exercise of Option to Purchase(OTP). Kindly provide following details:

1. OTP exercise date
2. Valuation
3. Cash-over-Valuation
4. Street Name
5. Block Number
6. Flat Type
7. Estate(e.g. Bedok, Jurong East …)
8. Your Name & Contact number(for verification)

If the deal is nullified subsequently is immaterial, because by exercising the OTP, sellers and buyers transact at an agreed price in consideration of the deposit. It becomes a binding contract, a done deal.

Please provide details through the comment link and we will expand this section accordingly when more information become available through public submission.

Received a call this morning from a lady, sorry line got cut off. Her question was “Can a foreigner who is single purchase a HDB Resale flat?”

The answer is “No”. Single, foreigner or Singapore PR is not allowed to purchase HDB Resale flat even though he/she is above 35 years old. Singapore permanent resident is not “permanent”, subject to approval and Re-Entry permit renewal. Singapore PR is a Foreigner with a PR Status and eligibility in relation to buying HDB Resale has remained unchanged.

From Feb 01, 2010, flat owners who sub-let rooms in their HDB flats will have to register with HDB within 7 days of doing so. They are also required to notify HDB when they renew or terminate the sub-letting of rooms, and when there are changes to their sub-tenants’ particulars, we assume within 7 days as well.

The new requirement will support the Ministry of Home Affairs (MHA)’s on-going efforts to eradicate loan-sharking activities, and to better protect HDB residents. Currently, some people use their old addresses to borrow from loan-sharks while they rent a room in another HDB flat. As they have moved their place of residence without updating addresses in their NRICs, this resulted in the new flat occupiers being harassed by the loan-sharks while the borrowers are untraceable.

Why are we mentioning it here, because non-compliance may affect your resale in the future. Penalty is $3,000(per incident, our guess). HDB may compulsorily acquire flat for repeat offender.

Information to be furnished:
a) Sub-letting commencement date
b) Sub-letting expiry date
c) No. of rooms sublet
d) Rental per month
e) Name of sub-tenants
f) Household structure of sub-tenant (family or individual)
g) UIN/FIN of sub-tenant
h) Nationality of sub-tenant
i) Citizenship of sub-tenant
j) Ethnicity of sub-tenant
k) Work pass of sub-tenant (e.g work permit, employment pass)
l) Sector which subtenant works in (service, construction, manufacturing etc)
m) Reasons for subletting

A lot of information required. Official press release titled “Flat Owners to Register Subletting of Rooms with HDB”. You can safely replace the 3 words “Subletting of Rooms” with “Subletting of entire Flat without prior Approval”. Why? Monthly rental is different between rooms rental and entire flat rental disguised as rooms rental. The availability of online registration speeds up the analysis of information furnished. More discoveries can be expected. If owners are tempted to rent out their flat without prior approval under the guise of rooms rental, don’t do it. Irresponsible and over-zealous agents may be persuasive, don’t give in. Ultimately owners will be held accountable.

If you have further thoughts or feedback, kindly do so through comment link below.

Letter from Chia Hern Keng
refer to “Asset that keeps growing” (Dec 30 TODAYonline)

Mr Mah Bow Tan does not think new Housing and Development Board (HDB) flats are overpriced because 80 per cent of buyers of new flats use their monthly Central Provident Fund (CPF) savings to pay for them. Furthermore, the National Development Minister pointed out that Singaporeans in their old age can cash out their flats to the government to finance their retirement.

I have some concerns:

* CPF savings is a form of social security. Using all of one’s monthly CPF savings for housing assumes that one’s income through the next 30 years or so will be stable. Is this realistic?

* Buying a new HDB flat is not only a major lifetime investment, it is also an essential one. One hopes to pass it down to one’s children. Selling it back to the government would not feature in one’s initial plan unless the future prospect of living in Singapore is really bleak.

* By cashing out, one will suffer a major opportunity cost – selling off a property paid for through a lifetime. It also means one’s children would have to buy a new and far more expensive flat.

Hence it does not solve the basic issue which is that of high prices of new HDB flats. As regards the desirable appreciation of a HDB flat, such asset appreciation is to be expected. But no matter how much the flat has appreciated, in the vast majority of cases, one still needs to live in it, hence the enhanced value would have no significance.

One way to ascertain whether it is overpriced or not is for the HDB to be forthcoming about the real cost of building the flats.

However if for some valid reason, the costing has to be kept confidential, then may I suggest that the government consider introducing competing developers into this public housing sector, granting them the same privileges – like in the allocation of state land at the same pricing.

That would bring about a price-moderating effect in public housing and may even enhance the level of efficiency in this sector.