New format may scare resale flat buyers
RESALE procedures for Housing Board flats have been revised and this could make buyers more cautious and cool the market further, said experts.
Buyers and sellers will be encouraged to negotiate based on latest transaction prices, instead of focusing on the cash over valuation (COV), as is the practice now.
Only buyers can request a valuation from the HDB panel of valuers, and this can be done only after a resale price has been negotiated and an option to purchase (OTP) granted.
PropNex Realty's chief executive, Mr Mohamed Ismail, said allowing valuation only so late in the deal could expose HDB flat buyers to a "higher vulnerability of a greater cash outlay if there is any gap between the agreed price and the valuation price".
In other words, if the valuation falls short of the agreed price, the buyer would face the prospect of topping up with cash.
Currently, most sellers would get a valuation report at the outset, and use that as a base to negotiate the COV. The COV is the amount in cash that buyers have to pay on top of the market valuation of the resale flat.
Such a practice is an "anomaly" unique to HDB's resale market and a contrast to the private market, where negotiations are based on recent transactions, said Minister for National Development Khaw Boon Wan.
Adding that nearly 40 per cent of resale transactions last month were priced below valuation, Mr Khaw said now is a good time to make this move.
In tandem, HDB will also publish daily the prices of resale transactions as soon as they are registered, to provide the latest market information.
The revisions took effect at 5pm yesterday. The option period will be extended from 14 days to 21 days to give buyers more time.
Mr Ismail expects HDB resale prices to "further dip" as potential buyers behave cautiously.
The seller, on the other hand, loses the advantage of getting a "first look" at the valuation, said Mr Colin Tan, head of research and consultancy, Suntec Real Estate Consultants.
Mr Nicholas Mak, director of research and consultancy at SLP International, said that in the period where COV was high, both buyers and sellers would "adjust their expectations of future COVs upwards, which further reinforces the upward price spiral".
However, Mr Alan Cheong, director for research and consultancy at Savills Singapore, said "transacted prices already have a positive or negative COV built in" and he does not think the revised procedures are a big change. Prices would still overshoot in a bullish market and undershoot in a down market. "In the end, is it a left-hand drive car or a right-hand drive car?" Mr Cheong asked.