It was not too long ago that Cash-over-valuation (COV) prices for resale HDB flats dominated the headlines. The rarer and more highly-in-demand the unit, the higher it went. HDB flats were being sold at close to the million dollar mark, with a few pulling ahead and making it across.
But the weakening property market has meant a dip in demand in resale flats and sellers now find themselves lowering their asking COV prices, or even selling prices, especially if there is some urgency involved in selling their HDB flat. From the median of $11, 444 in October, COV prices are now at $8, 000 in November. There were expectations that it will regain its foothold at $10, 000 by year-end. But the future seems a little foggy at the moment.
What are the factors causing this decline? And will these reasons resolve themselves in the new year?
- Housing curbs. Stricter loan limits means buyers now have lesser to spend and affordability of their property purchases will now take priority in their decision-making process.
- Less demand for resale units overall. As new private properties launch at an increasingly rapid pace, with smaller units available at lower prices, the popularity of public housing may continue to wan.
- Less demand for resale units in popular estates. As more BTO flats are rolled out, with some in mature estates, buyers may be drawn to apply for these instead of buying a unit off the resale market, especially if they are not in a hurry and location is not as crucial a deciding factor.
- Increasing number of HDB upgraders. As suburban condominiums become a more viable and popular option, there may be more HDB upgraders looking to sell their flats in order to purchase private, but this would also mean a growing pool of sellers looking to let go of their flat and hence diluting the intensity of the market.
Considering the fact that July 2009 was the last time COV prices fell below $10,000, the recent $8,000 mark could be one of the lowest in the last five years. In fact, some sellers are now offering their units for sale without any cash premium, and even at prices below valuation. But these cases could be few and far in between as resale units in popular HDB estates are still rare and may fetch reasonable prices.