Skip to main content
Hamburger Menu Close



More HDB resale flat buyers willing to pay prices higher than units' valuation, say property agents

SINGAPORE: Four growing, active sons are the main reason why Mr Hanafiah Yusof and his wife, Ms Nirmala, wanted an upgrade from their existing 900 sq ft Build-to-Order (BTO) unit in Dawson.

After searching for nearly seven months, they found their ideal unit - a 1,580 sq ft executive apartment in Clementi. 

“The location (was) just nice near our kids’ schools, near our parents, near my workplace, and amenities around there were a lot … It checked all our boxes - on a high floor, and the space and unit were well-maintained,” said Ms Nirmala.

But it came at a premium.

They had to pay S$45,000 extra in Cash Over Valuation (COV) – a sum that is the difference between the transacted price and the unit’s official valuation by the Housing & Development Board (HDB). Buyers must pay this sum fully in cash.

“Our agent did pre-empt us that because of the area – a mature estate – we have to expect to pay more,” Ms Nirmala told CNA.

Even then, it was above the S$20,000 to S$30,000 COV they had expected to pay, she said.

“But I think we weighed our options and I think it’s good that from this sale of (our current) unit, it was enough for us,” said Mr Hanafiah.

The couple is among a growing group of buyers who are willing to pay COV for their resale flats, amid a resilient property market.

WATCH: Homebuyers, HDB upgraders to scoop up homes in 2021 amid low interest rates

The COV component had been a concern in the early part of the last decade, when some buyers and sellers used official valuations as a base price, while negotiating the COV to add on to it.

HDB had said that buyers should instead negotiate based on recent transaction prices and focus on the entire sum of the flat.

The Housing Board then stopped publishing COV data in March 2014. It also changed the system such that a flat’s valuation would only be revealed after buyers and sellers had agreed on a transaction price.

Following the measures, along with a tepid resale market, transactions with COV became uncommon, said industry players.


But the trend is seeing a revival amid a robust HDB resale market, said property experts CNA spoke to.

Last year, HDB resale prices climbed by their highest since 2012, while transactions also rose sharply to an eight-year high.

Lim Yong Hock, PropNex's key executive officer, said that though the agency does not collate information on how their clients’ transactions compare to valuation prices, agents note that more COV transactions have been taking place.

“Places not even in prime locations, for example in the outskirts like Woodlands, Yishun or Bukit Panjang, are also seeing this kind of situation,” he said.

READ: HDB launches one-stop portal for flat purchases

OrangeTee’s senior associate district director Ryan Tan said on-the-ground feedback from his team of about 40 agents is that the trend has regained prominence since the end of the COVID-19 "circuit breaker" period.

He estimates that about 90 per cent of their resale transactions now entail COV sums – typically ranging from S$5,000 to S$20,000 – although he cautions that this may not represent the entire market.

A group division director at ERA Realty, Mike Poon, added that while one or two transactions out of 10 used to take place above valuation prices, this has tripled to at least five to six transactions out of 10.

PropNex’s Mr Lim attributed this phenomenon to higher demand from resale flat buyers, which supply cannot match.

A reason for the growing demand could be that more are turning to the resale market to avoid the longer completion times for BTO flats amid the pandemic, he said.

WATCH: Homebuyers reconsider BTO flats as COVID-19 delays construction

“It’s also not like you’re guaranteed to get (the BTO) because the subscription rate is still very high.

“Especially for some of the more centralised locations, those near the MRT, it can be 10 to 20 times oversubscribed. That is driving many buyers into buying resale rather than waiting for BTO," he added.

Other possible reasons for the heightened demand - the desire for a bigger living space after enduring the circuit breaker; and enhanced CPF housing grants from 2019 that made resale flats more attractive, said OrangeTee’s Mr Tan.

Mr Sofian Roslan, an associate marketing director at ERA Realty, added that paying a COV of S$10,000 to S$20,000 is “quite common” now.

“But I’ve heard from colleagues who have transacted about S$60,000 to S$70,000 (in COV). These are common at mature estates where the older blocks are with limited supply, so these are those that command high COVs.”

He added that other flat types, such as jumbo flats and executive apartments, typically attract higher premiums.


PropNex’s Mr Lim suggested that the trend could continue for the first half of 2021, because of the lag time between when transactions are made and when they start to change valuations.

“Valuers usually use past transactions as a benchmark, so when the new prices are not recorded yet, the valuation is not likely to follow the current market price," he explained.

That widening price gap could mean more transactions will happen at a price above valuation, he said.

READ: HDB to launch 17,000 BTO flats in 2021, similar to this year

But Huttons Asia’s head of research Lee Sze Teck said he expects the trend to stabilise in the coming months.

“If it was due to pent-up demand (from the circuit breaker), it would be dissipating over the few months already,” he said.

On top of that, more BTO flats are reaching their five-year Minimum Occupation Period (MOP) this year, meaning they are now allowed to be sold on the open market.

This could bump up supply and ease the stiff competition among buyers for resale flats, Mr Lee said.

About 25,530 HDB flats could reach their MOP in 2021, compared with the 24,163 flats that reached this milestone last year, according to PropNex.

OrangeTee’s Mr Tan added that the trend of COV will be checked at some point, because buyers are aware they have to fork out sums for COV in full and in cash.

“There will be a point when they become resistant to offering so much,” he said.

Source: CNA/cl(gs)