Your search results

Buying HDB Resale : How to Minimise COV

Posted by Jayson Ang on January 20, 2023

| 0

TLDR

Understanding Cash Over Valuation (COV) is crucial when buying a resale HDB flat in Singapore. COV is the additional amount paid above the property’s official valuation. Factors influencing COV include location, flat size, floor level, age, estate type, and unique features. To minimize COV, research HDB resale flat prices, secure the Option to Purchase (OTP) before valuation, or consider applying for a Built-To-Order (BTO) flat. Ensure financial readiness by keeping Total Debt Servicing Ratio (TDSR) below 55% and mortgage payments under 30% of gross income.

Buying a HDB Resale Flat : How to Minimise Cash over Valuation COV

Navigating the resale HDB flat market can be costly, particularly when the asking price ends up being higher than the appraised value – commonly referred to as Cash Over Valuation.

Despite the economic turbulence caused by COVID-19, the property market has demonstrated tremendous resilience. In June 2021, 19 resale million-dollar flats were sold and the proportion of HDB buyers who paid Cash Over Valuation rose from 1 in 5 in 2020 to 1 in 3 this year. To top it off, a recent buyer paid an astounding S$158,000 in COV for a four-room HDB flat in Tiong Bahru!

It’s time to face facts: when you’re shopping for a resale property, you’ll be at the mercy of market forces (aka fluctuations in daily pricing). Taking into account all the factors is important, but let’s not forget Cash Over Valuation (COV). The bad news is that it can make a big dent in your budget.

What is Cash Over Valuation?

If you plan to purchase a property and the amount exceeds its official valuation, this additional amount is known as the Cash-Over-Valuation (COV).

Bear in mind that the COV must be paid in cash without the assistance of CPF, grants or a home loan, resulting in an increased cash outlay – but the amount of the COV could depend on the characteristics of the property.

How Do I Calculate A Flat’s COV?

Let’s suppose a HDB-appointed valuer appraises a seller’s property to be worth $540,000 – however, due to its desirable location, you and the seller have mutually agreed to a transaction price of $550,000.

Cash Over Valuation = $550,000 – $540,000 = $10,000

This means that you would have to pay $10,000 in COV.

Buying a resale flat may not always result in COV; you could even haggle a price that turns out to be Cash At Valuation (C.A.V), meaning that the final price equals the HDB valuation.

However, if you’re lucky, it could even end up as Cash Under Valuation (C.U.V.), i.e., the flat is sold at a bargain lower than its actual value.

Despite The Rise In Cash Outlay, Why Do Buyers Persist In Paying COV?

If potential buyers believe the flat is worth the investment, they may decide to pay out-of-pocket for the COV. In the resale market, some houses are more attractive and sought after than others, and can therefore command a higher price – a price that is determined by a range of factors.

What Elements Play A Role In Determining The Levels of COV?

#1 Location, Location, Location

Potential buyers may be willing to invest in a property simply due to its attractive location – something that most BTOs can’t offer. Consider its proximity to renowned schools or how close it is to an MRT station, making the daily travel time a breeze!

#2 Flat Size, Age And Floor

The size, floor level, and age of a flat all factor into how it fares in the resale market. It’s widely known that larger flats tend to command higher prices, and the same goes for those situated on higher floors, offering spectacular vistas. Additionally, newly-MOP flats are highly sought after, allowing the new owner to enjoy a prolonged lease.

#3 Mature Estate

Living in a mature estate comes with a hefty price tag, but it’s worth it! After all, you get to be surrounded by a vibrant neighbourhood, plentiful cheap eats, and all your loved ones. Not to mention that, unlike BTOs, mature estates are already well established, so no more feeling like you’re in the middle of nowhere!

#4 Exceptional Features

The news is often abuzz with reports of million-dollar HDB transactions, and certain flats such as maisonettes, executive apartments and jumbo flats, which are increasingly hard to come by, are driving up the price to astronomical levels.

#5 Lack Of Supply

As demand for resale flats surpasses supply, buyers become more willing to pay premium prices to get their hands on a home swiftly, thus giving sellers the chance to benefit from higher prices and ultimately, more profit.

Ways To Minimise COV

Do Your Research

Doing your due diligence is essential in any transaction, especially when it comes to real estate. Nowadays, the prices of homes are far more transparent – you can easily check the daily HDB transactions to get an idea of how much properties are going for in your desired neighbourhood, be it Hougang, Yishun or Jurong, or the type of flat, such as a 4-room or 5-room unit.

We are fortunate to have an abundance of free tools at our fingertips. Get started by looking into HDB’s Resale Flat Prices webpage, updated daily. With the help of this, you can review the transacted prices of resale flats over the past two years. Just filter your search according to your needs, including the ideal price range for you.

Secure The Otp Before Receiving The HDB’s Official Valuation

Once the Option to Purchase (OTP) has been secured, the transaction price is typically fixed, even when the apartment’s valuation comes in at a much greater value.

To address the worrying trend of rapidly increasing Cash-Over-Valuations (COV), from March 10th, 2014, all valuation requests have to be made following the acquisition of an OTP.

Alternatively, You Can Consider Going For A BTO Instead

If you wish to stay clear of the volatile COV market, then applying for a flat directly from the government may be your best bet. Such flats tend to be much more affordable, and unfortunately, it may be difficult to get chosen for one of the more sought-after projects.

However, if you’re fortunate enough to be selected, you may find yourself in a great position when the flat reaches its MOP – although you may have to wait a couple of years before moving in!

In Conclusion

It’s thrilling to find a property that meets all of our needs, but be aware that it likely won’t come cheap. As buyers, it’s critical that we don’t find ourselves in a situation where the home loan repayments are too much for us to handle in the long run.

To avoid this, ensure that your Total Debt Servicing Ratio (TDSR) is no more than 55% of your gross monthly income and that your mortgage payments don’t exceed 30% of your gross income each month.

Final Thoughts

Carry out an in-depth financial analysis to guarantee you are making wise decisions for the near future and can confidently stand behind your decisions.
Also take your timeline and family wishes into account, plan ahead and provide your family with a sense of security so that you can proceed with peace of mind.

If you’re curious about the prospect of relocating to private property and would like expert advice, I’m just a message away!

You May Also Like …

All Buying Tips Reports

2024 Residential Property Market Outlook

Jayson Ang – December 22, 2023 –

TLDR The market outlook for 2024 suggests continued uncertainties affecting housing demand and risk appetite due to geopolitical tensions, macroeconomic...

All Buying Tips

Buying a Mega Development Condo? Here are 5 Overlooked Issues You Should Know

Jayson Ang – April 20, 2024 –

TLDR In the world of mega-developments, living in a large condo with over 700 units can bring challenges like ongoing...

All

URA 2025 Draft Master Plan: 6 Under The Radar Changes You May Have Missed

Jayson Ang – April 12, 2026 –

TLDR The URA 2025 Draft Master Plan outlines major developments in Singapore over the next 10-15 years, with 80,000 new...

All Blog Posts Buying Tips Opinion Selling Tips

Should You Keep Your Resale HDB Flat When Buying a Private Property? 5 Key Factors to Consider

Jayson Ang – November 3, 2024 –

TLDR In Singapore, owning both an HDB flat and a private property has become complicated due to factors like Additional...

Mandarin Top 5

Top 5 Best Non-Touristy Things to Do in Singapore

Jayson Ang – October 31, 2024 –

Singapore, a vibrant city-state known for its iconic skyline and diverse culture, offers a plethora of experiences for both tourists...

All Blog Posts Buying Tips

5 Facilities Selling Points Condo Sellers Should Emphasize To Entice Potential Buyers

Jayson Ang – May 23, 2023 –

TLDR When selling a condo, focusing on highlighting key facilities like gyms, swimming pools, family-friendly amenities, community gardens, and clubhouse...

All Blog Posts Buying Tips

Should I Buy In A Newly MOP HDB Or An Older Resale HDB?

Jayson Ang – March 18, 2023 –

TLDR When deciding between a recently MOP-ed HDB property and an older resale HDB property in Singapore, various factors come...

All Buying Tips Opinion

First-Time Homeownership After 40 in Singapore: Navigating Unique Risks

Jayson Ang – June 8, 2026 –

TLDR Older first-time homebuyers face unique challenges including lease decay risks, stricter loan-to-value (LTV) limits, and shorter loan tenures leading...

All Opinion

The Cost of Housing – Affordability vs Premium?

Jayson Ang – August 11, 2023 –

TLDR The blog post discusses the challenges Singapore faces in housing affordability, particularly the rising costs of private homes compared...

Mandarin Top 5

Top 5 Reasons : Why Investing in Singapore’s Property Market Is a Smart Move for Millennials – Expert Analysis!

Jayson Ang – October 13, 2024 –

In recent years, Singapore has emerged as a global financial hub and a prime destination for property investments. The city-state's...

Mandarin Top 5

Top 5 Japanese Restaurants in Singapore

Jayson Ang – September 14, 2024 –

Singapore, a melting pot of diverse cultures and flavors, offers an incredible array of dining experiences for food lovers. Japanese...

All Blog Posts Buying Tips

5 Risks Upgraders Should Be Aware of To Avoid Financial Troubles When Progressing Their Property

Jayson Ang – July 3, 2023 –

TLDR The article delves into the intricacies of property asset progression in Singapore's real estate market. It highlights the risks...

All Blog Posts Buying Tips

Discover What Else You Can Focus On Beyond PSF – Here’s How!

Jayson Ang – July 17, 2023 –

TLDR When considering real estate investments, factors like property size, location, and PSF play crucial roles in determining affordability. Smaller...

All Opinion Selling Tips

Punggol Northshore HDB Flats Reaching MOP: Navigating the Resale Window

Jayson Ang – January 26, 2026 –

TLDR In 2025, around 1,765 HDB flats from Northshore Residences I & II and Northshore StraitsView in Punggol’s Northshore will...

All Buying Tips

7 Essential Tips for Finding Your Perfect Retirement Home

Jayson Ang – October 27, 2024 –

TLDR Searching for a forever home should balance heart and practicality. Avoid homes with stairs, high cabinets, big kitchens, and...

All Buying Tips Opinion Selling Tips

$1.5 Million HDB Flats: Their Locations and Reasons Behind Being Singapore’s Priciest Public Housing

Jayson Ang – December 2, 2025 –

TLDR Singapore’s HDB resale market has entered a new phase, with at least 13 flats sold for $1.5 million or...

All Blog Posts Buying Tips

What Hidden Costs Are There When Selling Your House?

Jayson Ang – July 7, 2023 –

TLDR When selling your house, be prepared to cover expenses such as outstanding home loans, legal fees, property agent commissions,...

All Buying Tips Opinion Selling Tips

The Rise of New Launch 2-Bedroom Condos: Why Homebuyers are Prioritizing Them Over Resale Options in 2025

Jayson Ang – May 27, 2026 –

TLDR Two-bedroom condominiums are shifting from primarily rental investments to popular family homes, especially among small families and HDB upgraders,...