Discourage practice of COV, SISV urges

Supporting National Development Minister Khaw Boon Wan’s decision to stop releasing the median cash-over-valuation (COV) data, the industry body representing property valuers here has urged the authorities to go a step further and “discourage” the practice of paying COV.

The Singapore Institute of Surveyors and Valuers (SISV) cautioned yesterday – in a statement from its president (valuation and general practice) Lim Lan Yuan – that the practice will lead to a rapid rise in housing prices, encouraged by “exuberant sentiments ahead of economic fundamentals”.

The SISV added: “As ‘cash over valuations’ arise from specific individual buying decisions and are not necessarily paid in all transactions, they should not be recognised as such in the market. We should discourage the practice of ‘cash over valuations’.

The SISV reiterated that buyers and sellers should use market valuations or actual prices of recent transactions when negotiating the price of a HDB resale flat.

While median COV data – which had been published by the HDB until recently – is now used by sellers as the basis for the right to ask for a cash amount in any resale transaction, the SISV said COVs should only be paid in isolated cases where the buyer is “overly-anxious” and feels pressured to pay a cash premium. The HDB stopped releasing such data in its most recent official quarterly statistics in July.

Professional valuations already take into account market conditions but if COVs are consistently paid it will be subsequently incorporated into market value of the flat pushing up prices, said the SISV.

It also noted that as housing loans are made on the basis of the market valuation of a property – without taking into account the COV – COVs may affect affordability for buyers as more cash will be required for the purchase.

Last month, Mr Khaw had noted on his Facebook page that abolishing COV and relying on a professional valuer to set the price of resale flats was tried “years ago”. “COV then went underground as ‘under counter cash payment’,” he had noted.

Source : Today –  1 Sep 2011

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