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Nearly 40% of resale transactions last month
were priced below valuation, a negative COV. In fact, the market has coined a new term,
CUV: cash-under-valuation. Whether it is COV or CUV, the practice of
bargaining based on this, rather than the total price of the flat, is an anomaly unique to our HDB resale market.
How did it come about?
Currently, most flat sellers would obtain a valuation report for their flats,
which they then use as a base price and negotiate with buyers based on COV.
Contrast this with practices in the private market.
Negotiations there are rightly, based on the recent transaction prices, and are typically carried
out before the buyers request for valuation. So Er Lee Bee Wah has suggested that the HDB
resale market follow the practice in the private housing market. I agree.
With COVs now hitting zero or negative, now is a good time to make the adjustments.
I have asked HDB to move on this. HDB will rationalise the process of price
negotiations and restore the original intention of valuation, which is to help buyers get a housing loan.
In parallel HDB will publish daily, not monthly (daily, every day),
prices of resale transactions as soon as they are registered.
This way, buyers and sellers can refer to the latest market information during their negotiations.
Negotiating based on price rather than COV will take some getting used to.
However, it is a useful move for long-term market stability.