ST : Resale flat transactions and COVs fall: Mah Bow Tan

Dec 07,2010

Resale flat transactions and COVs fall: Mah Bow Tan

By Daryl Chin
MORE signs have emerged that the Government's cooling measures are having an impact on the property market.

Home buyers are paying lower cash premiums for Housing Board resale flats, and fewer resale transactions are taking place now, according to National Development Minister Mah Bow Tan.

The median cash-over-valuation (COV) amount for HDB resale flats dipped to $22,000 last month, down from $25,000 in October, Mr Mah said in an interview with Channel NewsAsia (CNA).

This is the second month in a row that the median COV has slid. October's figure was itself a drop from the $30,000 median COV seen in the third quarter.

Resale transactions have also fallen by some 30 per cent so far in the fourth quarter as compared with the third quarter, Mr Mah was quoted as saying in the report, which CNA broadcast yesterday.

He also said that the full impact of the measures would only be felt in another month or two, and though there is no need for further action now, the Government will take more steps if necessary.

High COV numbers, among other factors, led to cooling measures being introduced in August. These included restricting home buyers from owning both a private home and an HDB flat within a minimum occupancy period.

ERA Asia-Pacific associate director Eugene Lim said the measures 'effectively take out... private property owners from bumping up the COV prices'.

But he cautioned that COVs were only part of the whole story.

'Most deals are closed based on COVs rather than price, but I believe actual prices will still rise despite falling COVs, simply because valuation numbers are still going up.' Valuations are done by a panel assigned by HDB and are based on factors such as the price of past transactions.

He added: 'For example, a four-room flat in the Bedok area valued at $400,000 three months ago would be about $420,000 as of last month.'

Analysts The Straits Times spoke to said median COVs may fall even further.

SLP International Property Consultants' research executive director Nicholas Mak said: '$22,000 is still a bit high, it will likely fall further because of factors such as an increased housing supply.' HDB has said it will release 22,000 new flats next year, up from 16,000 this year.

In the CNA interview, Mr Mah said housing could be a key topic in the next general election: 'It's always been an issue at every election as far as I can remember. But this time round, it would probably be more than an issue.'

He also said he welcomes a contest from opposition parties in his Tampines GRC.