HDB resale rule one month on: Buyers cautious

Previously, buyers of resale HDB flats knew the cash premium they were committing to when they agreed a price. Now they do not, making them more cautious in their offers, and a property agent says it has become a guessing game. -- ST PHOTO: CAROLINE
Previously, buyers of resale HDB flats knew the cash premium they were committing to when they agreed a price. Now they do not, making them more cautious in their offers, and a property agent says it has become a guessing game. -- ST PHOTO: CAROLINE CHIA

Buyers fear high cash outlay while sellers' bargaining position weakens: Property agents

A month after the Housing Board's new resale process began, the need to agree a price before getting a valuation has not been popular, say property agents.

Even though the market has adapted to looking at past transactions as a guide, buyers still dislike the uncertainty over their cash outlay, while sellers find it hard to bargain.

Previously, sellers would first get an official valuation from the HDB, then use it as a basis for negotiation with buyers.

But from March 10, the HDB accepts valuation requests from buyers only, and only after a price has been agreed.

"First, there were a couple of weeks of confusion," said Prop-Nex Realty agent Michelle Lai.

And though buyers now better understand the change, they are holding off on making decisions.

"Even though they are keen to buy, they are reluctant to decide a price," said Spacez Real Estate agent Cheryl Tan.

This might partly be due to the hope of better deals later. Dennis Wee Realty agent Priscilla Pang said: "I believe that buyers are still holding on, waiting for the market to drop further."

But there are also concerns about possible nasty surprises.

The HDB valuation determines the maximum housing loan and amount of Central Provident Fund savings that can be used to fund a purchase.

If the agreed price is higher, the excess is paid in cash - what was known as cash-over-valuation (COV).

Previously, buyers knew the cash premium they were committing to when they agreed a price. Now they do not, making them more cautious in their offers.

"It's a guessing game," said Singapore Estate Agency agent David Ang. "If their finances are tight, they bear the risk (of a high cash outlay)."

And if they back out, they lose the amount they had to pay the seller for an Option to Purchase, which is usually about $1,000.

In today's cool resale market, the risk is lower.

The median COV fell to zero in February, with many units in non-mature estates going for prices below valuation.

Still, Dennis Wee Realty agent Judy Tan advises buyers to have enough ready cash - at least $10,000, say - so they will not be caught out.

As for sellers, the change weakens their bargaining position, as they can no longer use the valuation as a basis for asking price.

"Most sellers today are desperate" as they have bought new flats or condominiums and are collecting their keys soon, notes Prop-Nex Realty agent Charles Tan.

Nevertheless, both sides are getting used to the new reality.

One alternative Mr Tan uses to help sellers is the Singapore Real Estate Exchange's X-Value, which approximates a unit's value.

But most agents say the HDB's proposed option - looking at past transactions - is enough.

"Ultimately, using past transactions in the vicinity is more useful (than a single figure)," said ERA Realty agent David Lim.

The change has not affected popular areas such as Queenstown and Ang Mo Kio, he said, adding that, otherwise, "buyers are adapting".

janiceh@sph.com.sg