More HDB resale flats being sold with zero COV

More people are selling their Housing and Development Board (HDB) flats in the resale market without a cash premium.

The Singapore Real Estate Exchange (SRX) said transactions involving zero Cash-Over-Valuation (COV) have more than tripled, from 14 in January to 49 in July.

The overall median COV dipped to a low of S$20,000 in July, the lowest since 2011.

SRX now said it is seeing more people selling their flats even below that level – without any cash premium.

Zero-COV transactions made up 1 per cent of all HDB resale transactions in January.

This went up to 3.9 per cent in July, and 5.7 per cent in August so far.

There have been 32 zero-COV transactions recorded by SRX in August so far.

On a yearly basis, zero-COV transactions made up 1.7 per cent of all HDB resale transactions in 2011, compared to 1.9 per cent in 2012.

From January till now, zero-COV transactions made up 2.1 per cent of all HDB transactions.

Christine Li, head of research and consultancy at OrangeTee, said: “Previously, I think it took about four to six weeks to close the deal. But now, it is taking longer. Some can be as long as four months.

“A lot of sellers are still asking for high COVs, but the buyer pool is shrinking because of the January cooling measures as well as the ramp up in BTO (Build-to-Order) supply.

“The seller actually has to compete with the BTOs to offer buyers the same kind of deals they can look for in the market.”

According to SRX data, from the beginning of the year till July, 164 zero-COV transactions were recorded

The top five towns that have seen the most zero-COV transactions are Jurong West, Hougang, Woodlands, Punggol and Sengkang.

These are places where new BTO projects were launched by the HDB in the past year.

Property analysts have said that even though HDB resale flats are being sold with zero cash premium at valuation level, property sellers are still likely to make a profit from their transaction.

Nicholas Mak, executive director for research and consultancy at SLP International Property Consultants, said: “If they were to have bought their flats brand new from the government, they would have bought it at a price that is below the current market price. Or even if they were to buy it as resale flats five years ago, during the financial crisis, chances are they would have bought it at a price that is cheaper than today.”

With more residential units being completed this year, analysts said more sellers can be expected in the HDB resale market.

So more zero-COV transactions can be expected, and even some negative-COV transactions as well.

Source : Channel NewsAsia – 26 Aug 2013

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