The end of COV seemed to lurk long before the announcement of his removal by Singapore’s Ministry of National Development on Monday 10, 2014. Minister Khaw Boon Wan stated that the Singapore Housing and Development Board (HDB) will only accept applications for assessment after Sellers grant a call option to buyers of resale apartments, which means that the negotiations of resale transactions will no longer include the cash overpricing as used until now.
But before this policy change, there was a higher frequency of a phenomenon commonly called Cash-undervaluation (CUV), the exact opposite of COV. While in COV transactions buyers pay a cash premium higher than the valuation of a resale floor, CUV transactions are those in which buyers pay a price lower than that established by professional appraisers.
In the past, property buyers sometimes paid up to SGD 100,000 above the valuation of a resale apartment, but with the increase in cases of CUV transactions, sellers in some cases accept prices significantly below the professional valuation. from your flat.
HDB data from January 2014 showed 28.5% of resale deals closed below appraisal, underscoring the growing number of sellers accepting deals below the appraiser’s suggested price. Some areas of Singapore are more affected by this phenomenon than others. Jurong West and Sengkang, for example, have had half of their resale transactions with negative cash premiums. An example of the drop in resale prices is PSF’s price differences (per square foot) between 2013 and 2014, and this year it saw a 4.47% decrease in Jurong West.
Units located on mature farms or in other good locations near shopping malls or MRT stations are more likely to be in demand, especially if they are nicely designed. Last year’s HDB data showed 105 units sold in October for a price lower than their valuation, meaning that the number of CUV transactions in October was four times higher than those that occurred between January and June 2013. Many Singaporeans They have experienced the disappointment of not having interested buyers in their apartments and having to cut their under-appraisal prices out of desperation and an urgent need for money.
As the VOC is a benefit to sellers and the CUV an advantage to buyers, the recently imposed shift to revert to the original valuation purpose is expected to bring much needed balance to the Singapore resale market.