HDB upgraders feel pain over lower COVs

Housing and Development Board (HDB) upgraders are facing challenges as they look to move into the private housing market, with cash-over-valuation (COV) figures falling amid a weakening resale market.

The HDB has stopped providing overall COV figures for resale flats, but data released from PropNex Realty for February shows that average COVs fell between S$3,000 and S$7,000, excluding three-room units.

In addition, January’s resale deals saw median COVs drop between S$3,000 and S$6,000 across all flat types. Industry players estimate that the average COV across the board is now around S$25,000, down from S$35,000 in Q4 2011.

The drop in COVs will affect upgraders eyeing the private property sector since they will have less cash on hand, commented Chua Chor Hoon, Head of Asia Pacific Research at DTZ. Chua noted that this is an indication that the HDB resale market will weaken this year.

According to property watchers, demand and supply side factors are controlling the HDB resale market by keeping buyers and sellers on the sidelines.

“Prices of resale flats have appreciated significantly. For existing owners, there is no reason for them to sell at a lower price as private properties are not cheap either. To upgrade and avoid taking excessive financial burden, many need to sell off their existing HDB,” said Png Poh Soon, Head of Consultancy and Research at Knight Frank.

“(On the other hand) buyers with financial constraints will turn to BTOs (Build-to-Order flats) because it is cheaper (while) those who can afford ECs (executive condominiums) believe they are getting a better deal as the price quantum between some resale flats and ECs are very close,” he added.

Source : PropertyGuru – 26 Mar 2012

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