Less cash upfront but …

More choice for home-buyers

HAD you $20,000 in cash to pay for the Cash-Over-Valuation (COV) component of a resale 4-room Housing and Development Board (HDB) flat, you would have better bargaining power now than in the last quarter of 2007.

Back then, you might just have been able to afford such a flat in far-flung areas such as Bukit Panjang, Chua Chu Kang, Jurong or Woodlands.

But between April and last month, you could have had choice pickings from locations such as Ang Mo Kio, Tampines or Hougang.

On Friday, second-quarter data from the HDB showed that even as resale prices rose by 4.5 per cent, the good news for home-buyers was that the median COV dipped to $20,000 – $1,000 lower than in Q1 and down from $22,000 in Q4 last year.

Reflecting strong demand that was a contrast to weakening sentiments in the private sector, the total number of HDB resale transactions grew 22 per cent to 7,760 in Q2.

Industry players attribute the dip in COV prices to the higher valuation of resale flats :(this is based on the previously transacted price of similar flats).

This has led to buyers being far less willing to pay inflated COVs which, last year, hit peaks of $80,000 to $100,000 in choice locations.

Still, rare exceptions stood out in the second quarter: The highest median COV of $93,000 for a five-room flat was recorded in Bukit Timah. And home-buyers were willing to pay a higher cash premium for three, four and five-room flats in Toa Payoh and Kallang/Whampoa.

In the latter area, five-room flat buyers paid some $38,000 in cash over valuation, which analysts attributed to the proximity to the CBD, riverside living and plans to transform it into a new lifestyle district with retail and entertainment facilities.

On the whole, demand in the resale market is coming “from up-graders, down-graders and permanent residents”, said ERA’s assistant vice president Eugene Lim.

At the same time, with there being hardly any surplus stocks – compared to five years ago when the HDB had 25,000 unsold flats – buyers have few choices if they do not want to wait for a new HDB flat to be built on demand.

But Mr Lim and Propnex chief executive Mohamed Ismail expect COVs to continue tapering, even if resale flat prices rise further.

Mr Ismail calls the situation a win-win one: Buyers do not have to fork out so much out of pocket, and sellers can still command a high price for their flats through valuation.

Source : Weekend Today – 26 Jul 2008

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