Revised income ceiling lowers COV expectations

Home owners eager to sell their flats seem to have lowered their expectations of getting large cash premiums, after the Housing and Development Board (HDB) raised the income ceiling for new flats and housing subsidies.

Property agents expect the new rules to change the make-up of HDB resale flat buyers, as it will create more housing options for the elderly, couples and singles.

With the possibility that these three groups will be opting for new flats rather than resale homes, property sellers have tempered their expectations of obtaining large amounts in Cash-Over-Valuation (COV), or the sum above the flat’s valuation paid by buyers.

“Before, it was the standard for many sellers to ask for S$50,000 to S$80,000 for COV. Now, many of them have lowered this to below S$50,000,” noted Daniel Tan, a property agent at C&H Properties.

He added that four- and five-room resale flats in Ang Mo Kio, Bedok and Woodlands have posted reductions in their asking COV values.

The trend appears to be in response to the income ceiling revision to S$10,000 from S$8,000 for couples seeking to purchase new HDB Build-To-Order (BTO) flats or via a HDB loan or Central Provident Fund (CPF) housing grant application.

Industry observers told The Strait Times that they expect first-time buyers in the HDB resale market to lessen, as they can now buy new flats or executive condominium units.

The new rules have enabled COVs to moderate and cool price increases in the resale market.

Eugene Lim, Executive Officer at ERA Realty, noted that buyers should not expect prices to fall any time soon, since the supply crunch in the resale market is still strong — it will take some time for the new HDB flat supply to reach the market before the cooling starts.

Source : PropertyGuru – 22 Aug 2011

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