One in four resale HDB flat buyers paid cash over valuation in 2022

Cash over valuation refers to the difference between the sale price of a resale flat and its actual HDB valuation. ST PHOTO: ONG WEE JIN

SINGAPORE - About one in four buyers of resale Housing Board flats paid cash over valuation (COV) between January and October 2022, Minister for National Development Desmond Lee said on Monday.

This is an increase from 2020, when around one in five resale flat buyers paid COV, Mr Lee said.

However, it is an improvement from 2021, when one in three buyers paid COV, he added.

Mr Lee was responding in a written reply to a parliamentary question by Mr Louis Chua (Sengkang GRC), who had asked what the current proportion of HDB resale transactions with COV was.

COV refers to the difference between the sale price of a resale flat and its actual HDB valuation, which can be paid for only in cash by the buyer.

The majority of buyers did not have to pay any COV in 2022, Mr Lee said.

For each flat type, the 25th percentile and median COV across all towns was zero, while the 75th percentile COV ranged from $5,000 to $38,000, he added.

Prices for HDB resale flats have been increasing for the past 10 quarters, rising 2.6 per cent in the third quarter of 2022.

There were 21,299 resale HDB flats sold in the first three quarters of 2022. In 2021, 31,017 resale units changed hands, while in 2020, that number was 24,748.

Cooling measures for the property market introduced in recent months included reducing the loan-to-value limit for HDB loans from 85 per cent to 80 per cent, as well as the introduction of an interest rate floor of 3 per cent for HDB loan eligibility letter applications.

Meanwhile, private home owners who wish to buy HDB resale flats must now wait for 15 months after selling their homes.

Separately, Leader of the Opposition Pritam Singh had asked about the prices of built-to-order (BTO) flats in mature estates for the first nine months of 2022, as well as the mortgage servicing ratio for buyers taking HDB loans for BTO flats in mature estates during this time.

Earlier in November, Mr Singh (Aljunied GRC) had sparred with Second Minister for National Development Indranee Rajah on the issue of development costs of new HDB flats and details of subsidies provided to buyers.

Ms Rajah had asked the Workers’ Party chief to file a parliamentary question on the affordability of flats in mature estates.

Mr Lee said in a written reply to Mr Singh that the median prices of BTO flats in mature estates stood at $364,000 for a three-room flat, $597,000 for a four-room flat, and $784,000 for a five-room unit during the first three quarters of 2022.

The prices of BTO flats in mature estates are generally higher than those in non-mature estates, largely attributable to factors such as their proximity to the city centre and amenities, Mr Lee said.

He added that HDB provides “significant subsidies and grants”.

Over the same period, more than 80 per cent of those who had bought BTO flats in mature estates and collected their keys had a mortgage servicing ratio of 25 per cent or lower for their HDB loans.

The ratio refers to the proportion of monthly income used to service mortgage instalment payments.

“This means that these flat buyers can service their HDB loans using their monthly CPF (Central Provident Fund) contributions, with little or no cash outlay,” he said, noting this is “significantly lower” than the international benchmark of between 30 per cent and 35 per cent.

The house price-to-income ratios over the same period for more than 70 per cent of buyers was below five, Mr Lee added.

This is considerably lower than in cities such as London and Sydney, where the ratios are between eight and 15 times, he said, adding that in Hong Kong, it is more than 20 times.

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