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Angst over HDB resale flat valuations
THE Housing Board's move to publish daily instead of fortnightly figures on resale transactions will help create a more informed market and a more level playing field. The overarching goal, of course, is for the HDB resale market to achieve long-term stab
THE Housing Board's move to publish daily instead of fortnightly figures on resale transactions will help create a more informed market and a more level playing field. The overarching goal, of course, is for the HDB resale market to achieve long-term stability - with price movements reflecting any imbalance in supply and demand and price differences reflecting the attributes of units, like location and age. But the market can suffer from distortions when either supply or demand is out of kilter with the other and when transactional practices in themselves have the effect of boosting or depressing prices. Among the latter is the payment of cash over valuation (COV).
The HDB's intention in publishing COV tables earlier for various housing estates and types of flat was to make the market more transparent through the provision of information. But in a rising market, fuelled by high demand and weak supply, COVs provided a psychological incentive for marking up prices. Thus, sellers almost invariably asked buyers for a cash premium above valuation although the distinguishing attributes of their flats had been built into it in the first place. Also, the practice affected the affordability of resale flats because the premium had to be paid in cash.
Predictably, the converse has happened in a weak market led by ramped-up supply. The difference is stark with the median COV having gone from a peak of $38,000 in mid-2011 to zero last month, with more transactions closing below valuation.
So, will COVs make a comeback if and when the market roars again, perhaps because supply cannot match demand - always an inexact science? The answer might lie in the methodology of HDB valuations which critics claim is opaque and less science than opinion.
A key factor considered is the range of comparable recent transactions. Indeed, in the private market, valuations largely match transacted prices and the valuer's report might tell the diligent client little that he or she doesn't already know. What perplexes the public is why the HDB resale market has to be any different and why it is necessary now to make valuation a guessing game.
Whatever the state of the market, there will always be classes of resale flats that lack adequate or any transactional data for comparison, like the first units of The Premiere @ Tampines to be put up for sale. Then, buyers and sellers would both benefit from upfront valuations that are wholly objective. The Singapore Institute of Surveyors and Valuers can take a leaf out of the Council for Estate Agencies' book by educating the public on relevant factors to consider and how its members arrive at a conclusion.