SINGAPORE: A number of participants at the latest "Our Singapore Conversation" on housing have called for the Cash-Over-Valuation (COV) component of HDB resale flats to be scrapped.
COV refers to the cash premium paid for a HDB resale flat, on top of the unit's market valuation.
While COVs are not mandated by HDB, transactions are based on an agreement between buyer and seller. Though some, like 42-year-old civil servant Fiona Tan, said such arrangements should not be allowed altogether.
"For singles especially, we are on a single income. If a couple with two incomes is finding it hard to make ends meet, what more with a single income so we really hope that for single-income people, who don't have really that much cash on hand, something can be done about the COV," said Ms Tan.
Participant Sean Padman Israfil Mcmenamin suggested if the government does not plan to scrap the COV, it could at least exclude it from the valuation.
Another participant said scrapping the COV would curb profiteering and speculation, and in turn bring down resale flat prices.
However, HDB has explained why this would be difficult. On its "HDB Speaks" website, it writes that COVs are subject to the dynamics of the housing market, prevailing economic factors and negotiations between buyer and seller.
For example, it is said that when the property market is thriving, COVs would increase but during a downturn, there could be situations of zero or negative COVs.
Director of property firm Chris International, Chris Koh echoed this view.
He said: "We can't put a finger to it that only COV pushes up resale prices because valuations also do go up. When the market is strong, and prices are on the ascending rate, valuations inevitably will also go up so the value of the flat already increases prices inevitably.
"Adding in the COV component is because of demand and supply. When we have a lot of people wanting to buy the area, sellers get a bit swell-headed, and they start asking for higher cash premiums. If there is no demand for those flats, those cash premiums will just come down. We have heard of people selling at valuation, or below valuation in times of crisis."
COVs reached a peak of S$35,000 in January 2013, though the figure has been coming down.
According to preliminary data from the Singapore Real Estate Exchange (SRX), COVs stand at about S$27,000 in the first three weeks of May. The lowest since April 2012.
Around 50 participants attended the dialogue session on Wednesday night, which focused on housing affordability. This is the third in a series of four housing topics being discussed.
Participants were also asked where they would like to see resale flat prices heading in the next one to two years.
About 60 per cent of participants said they would like prices to go down. Most of the others said they would like to see prices maintained, while only a handful suggested prices should increase.
Participants also threw up suggestions on how Build-To-Order (BTO) flats can be made more affordable. - CNA/ac/fa
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