Government policy could put a lid on COV

Several homeowners are banking on the continued demand for resale flats by asking for higher cash-over-valuation (COV), according to an ECG Property expert.

However, with the raising of the income ceiling for HDB flats and executive condominiums (ECs), he hopes high prices taper off.

On 14 August, Prime Minister Lee Hsien Loong announced during his National day Rally speech that the HDB income ceiling will be increased to S$10,000 from S$8,000, while the income ceiling for ECs will be raised to S$12,000 from S$10,000. This move is expected to affect mass market condos.

“As for (the) HDB market, the demand has outstripped the supply. HDB owners with private properties are not selling their flats and this has led to a supply crunch (and) resulting in the sky-high COV. Hopefully the new measures can help put a lid on the COV and bring them down to realistic levels,” said Eric Tng, Senior District Director at ECG.

“I feel the impact on BTO should not be high. Most first-timers for BTO flats are the younger newly-weds and their household income would be around the S$8000 level. But for ECs, it should take off some demand for newly launch mass market condos. And HDB resale buyers with household income of S$8,000 to S$12,000 will consider buying an EC instead of a resale flat,” he added.

In addition, Tng believes the new policies will not affect the private market.

“I dont think these measures will affect the private market as the measures are targetted at first-time houseowners competing in the HDB resale market. I feel its also a reaction to the recent loss of votes in the GE,” he quipped.

Source : PropertyGuru – 17 Aug 2011

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