Reasons for and Rate of Increase in Cash-Over-Valuation for Resale HDB Flats

Mr Edward Chia Bing Hui asked the Minister for National Development (a) whether there is a trend of increasing Cash-Over-Valuation (COV) for resale HDB flats; (b) if so, what are the reasons for the increasing trend; and (c) what has been the rate of increase in the past one year.

HDB resale flat transactions are conducted on a "willing-buyer-willing-seller" basis, with prices negotiated and mutually agreed upon between flat sellers and buyers. The transacted prices of resale flats for the last 12 months are published on the HDB InfoWEB to guide potential sellers and buyers.

After a resale price has been agreed upon, the flat sellers will grant an Option to Purchase (OTP) to the buyers. If the buyers wish to use their CPF savings or a housing loan to pay for the flat purchase, they will need to make a "Request for Value" to HDB. Cash-Over-Valuation (COV) arises when the resale price is higher than the market valuation of the flat, as the difference can only be paid by cash . Otherwise, there is no COV. Buyers can decide whether to exercise the OTP for the resale transaction depending on the valuation and any COV payable. Should they choose not to proceed with the transaction, buyers will forgo the option fee of between $1 and $1,000 paid to the seller.

The proportion of buyers who paid a COV increased from around one in five in 2020 to around one in three in 2021. This reflects the current broad-based demand for housing, including in the private housing market, supported by the low interest rate environment. Notwithstanding this, the majority of buyers did not have to pay any COV, and the median COV each year has remained at $0.

The current proportion of buyers who paid a COV is significantly lower compared to the period between 2010 and 2013, which was the previous period when more transactions with COV were observed. At that time, almost all resale flat buyers paid a COV. The prevailing practice then was for sellers to obtain a valuation, and negotiate a COV with the buyers which will determine the resale price. Since 2014, HDB has therefore required buyers and sellers to first agree on the resale price, with the valuation performed after that for the purpose of determining the amount of loan and CPF savings that can be used for the flat purchase.

We will continue to monitor economic and housing market conditions closely and ensure that Singaporeans have access to affordable public housing.