COV-Want to pay or not?

Seems like the buzzword these days for buying a resale HDB flat is COV, or Cash-over-value. This is the cash that one pays over the valuation of the house,which cannot be financed by a bank loan.

I have been servicing buyers for the HDB market, and the newspaper Strait Times Life section reported. It is true by what they said. Median COV is around $30,ooo, and the lowest is around $15,000. Even a house in its original condition(means not an iota of renovation done,except for some fixtures), is asking minimum $15,000. That’s ridiculous!

Home buyers, please do not just jump into a deal like that. What drives the “COV market” is the ability of buyers with ready cash, and thus setting standards. COV of $30,ooo or even $40,000 is ok, if the house is reasonably done up. That doesn’t mean every seller should be selling high. Judge your own home, and see whether you would buy that home yourself at that price of COV that you are setting. A good agent will be able to tell if yours is a ridiculous figure. Remember, that the market will stabilise eventually,once the new BTOs(Built-to-Order flats) are up. Trying to cash in then,will be an uphill task. I always ask my buyers to have at least $15,000 in their hands before they start looking for a house, and of course, also means you are limited by choice.

Why do I say $30,000 COV is still ok? Renovation costs is the next consideration you have after paying for a house. My cousin who bought a house in Pasir Ris bought it at $20,000 COV, and it was well worth because of the designer deco. It was even painted fresh when they moved in. Such conditions are hard to find, and if you do find it, then be prepared to pay for it.

And if your house is in a block that restrticts certain races, the forget about putting high COVs. You can try, but be prepared to go down on the figures. Get the one closest to that. In my experience, sometimes even if my buyer telles me that he’s very restricted in the COV, sometimes, it will be hard to let a good buy go. End of the day, buyer and seller must be happy with what they are getting.

So, is COV here to stay for good. Perhaps for the next few quarters, but i do see it coming down from the present asking price. Meanwhile, sellers need to be aware of market conditions and sentiments. Buyers are now smarter, looking at the overall value of a house,rather than to give in to market pressure.


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