Your search results

Discover the 3 Top Factors Impacting HDB Resale Valuation in Singapore: What Every Buyer Must Know!

Posted by Jayson Ang on July 27, 2023

| 0

TLDR

The blog post discusses the increased demand for HDB resale flats and the impact on prices. It emphasizes the importance of understanding HDB valuation when purchasing a resale flat, affecting CPF savings, loan amount, and Cash Over Valuation (COV). The process of obtaining an HDB valuation report is outlined, along with factors influencing COV payments. It also covers changes in property valuation practices over the years and factors affecting COV amounts. Additionally, it provides insights on how to estimate HDB valuation and reduce COV through research and negotiation strategies.

The increased demand for HDB resale flats has caused prices to climb for the past 29 months in a row, culminating in a 2.6% jump in the HDB Q3 2022 Resale Price Index from Q2 2022.

With construction of several housing projects, including HDB BTO flats, delayed for a few years, many home seekers are turning to the HDB resale market in search of privacy, a larger space, and the perfect home.

When purchasing a resale HDB flat, it is essential to understand how HDB’s valuation will affect you. Obtaining the valuation is imperative, as it will influence both the housing loan and CPF amount you can use.

Before getting the valuation, make sure you agree with the seller on a price and sign the Option to Purchase (OTP). You can also do your own research to make sure you don’t pay too much Cash Over Valuation (COV) or extra cash.

This article will provide you with the insight and other details you should keep in mind about HDB’s valuation.

HDB Resale Valuation: An Overview

HDB resale valuation what is it? : HDB’s estimation of how much the resale flat is worth.
What does the HDB valuation affect? : The amount of CPF savings you can use, the loan amount you may take, and COV to pay.
How to get an HDB valuation report? : After signing the OTP, the buyer can submit a Request for Value.

HDB Resale Valuation: How Does It Work?

When buying a resale HDB flat, the first step is to negotiate a price with the seller and pay the option fee.

To secure your purchase, an HDB resale valuation is then necessary. It is simply an estimation of the flat’s worth and is part of the HDB resale application process.

You will have to submit a Request for Value to HDB if you are using CPF savings or a housing loan from HDB or a bank.

Once you’ve received the OTP from the seller, you can submit your valuation request to HDB.

If HDB deems a valuation is necessary to determine the worth of the property, a valuer will be dispatched to the flat for an inspection.

How Does HDB Property Valuation Affect HDB Resale Buyers?

The decision of how much CPF savings, housing loan, and COV to pay for your resale flat all comes down to the HDB property valuation.

For example, if the agreed selling price of your flat is $725,000, but the HDB valuation is $700,000, then you would need to fork out an additional $25,000 as COV, since the amount of CPF savings and housing loan you can use is determined by the lower value.

The COV has a direct impact on the stamp duty fees you’re liable for, such as Buyer’s Stamp Duty and Seller’s Stamp Duty, as these are calculated on the higher HDB valuation or price.

To put it simply, the COV will likely mean higher BSD and SSD payments.

1. Amount of CPF Savings You Can Use

If the Remaining lease of the property is at least 20 years and CAN cover the youngest buyer until at least age 95, then Buyer can use CPF to pay for the property up to the HDB Valuation Limit
If the Remaining lease of the property is at least 20 years and CANNOT cover the youngest buyer until at least age 95, then the Use of CPF will be prorated based on the extent of the remaining lease of the property and can cover the youngest buyer to the age of 95. This will help buyers set aside CPF savings for their housing needs during retirement (e.g. a replacement property).

The amount of CPF savings you can put towards your HDB resale flat purchase will depend on the length of the remaining lease.

For instance, if the remaining lease of the flat is at least 20 years, you could utilise up to $700,000 of your CPF savings.

Check out the CPF Board’s website for their online calculator, to help you determine the exact amount of CPF savings you can use.

2. Loan Amount You Can Get

HDB Loan : LTV 80%
Bank Loan : LTV 75%

Taking a loan from HDB or the bank? Your loan amount will be based on the HDB valuation, not the selling price. The LTV ratio of the resale flat will determine the amount you can borrow – the maximum amount allowed!

Following the latest cooling measures announced on 29 September 2022, the Loan-To-Value (LTV) ratio for HDB loans has been decreased to 80%. That translates to a loan of up to $560,000 for a flat valued at $700,000.

However, if the remaining lease of the flat is too short to cover the youngest buyer from age 95 and onwards, the loan limit will be proportionally reduced. On the contrary, bank loans have an LTV ratio of 75%, meaning you can take a loan of up to $525,000 for the HDB flat.

3. COV You Might Have to Pay

The difference between the selling price and the valuation of your HDB flat is referred to as the Cash-Over-Valuation (COV). Unfortunately, your housing loan, either from HDB or a bank, will only cover up to the valuation amount, thus leaving you with the task of coming up with the COV in cash. For example, if the COV was $25,000, then you’d have to have that amount of cash ready!

Before 2014, the high prices of HDB property valuation played a major part in sky-rocketing COV fees.

After the implementation of cooling measures to lower property prices, COV prices decreased, but due to heightened demand for resale flats, the COV has again come to the fore with a solid property market, seeing more buyers shelling out more for their desired HDB flats.

How COV Worked Prior to 2014

Prior to 2014, the seller and the buyer used to decide on the selling price of the flat after considering the HDB’s valuation.

Now, with the HDB’s valuations and COV prices being made available online, they are mostly negotiating the COV amount.

For instance, once the HDB values a flat at $700,000, the buyer and seller work out the COV to be paid on top of this, based on the prevailing COV prices.

The property market saw a significant boom in 2014 due to property owners taking advantage of the situation and raising the selling prices for a greater profit.

This meant property prices skyrocketed, making it less affordable for buyers to purchase a flat – with some new and spacious units in prominent locations commanding an eye-watering $200,000 or more!

In fact, at the end of 2013, a maisonette in Bishan sold for a record $250,000 COV price! In response to this, the Government introduced measures in 2014 to stabilise the property market.

HDB Property Valuation From 2014 Onwards

A major switch made is that the HDB now requires the buyer and seller to first agree on a price before any property valuations can take place. This means that the days of COV-based price hikes are long gone, and instead, the focus is on the resale transaction prices published daily by HDB.

Once the buyer and seller have agreed upon the selling price of the HDB flat – in this example, let’s say it’s $725,000 – they should then proceed to get a property valuation done. This will let them know the amount of COV to be paid, whilst also preventing the seller from attempting to raise the price for higher profits.

Fortunately, the price of HDB resale flats has gone down, making them more affordable for buyers.

What Are Some Factors That Affect the COV?

Several elements impact the amount of COV you’ll be required to pay, but the primary determinants are:

Location;
Flat condition; and
Size of the flat

1. Location of the HDB Flat

Flats that are situated near MRT stations, shopping malls, and schools are valued higher, especially in established neighborhoods where multiple amenities are within easy reach.

This extra convenience and easy access attract buyers, who are willing to pay a higher price for the privilege.

A resale flat in Bishan, due to its advantageous location and surrounding amenities, is more likely to be sold for more than its estimated value, whereas a HDB flat in Woodlands will not fetch such a high price.

Similarly, Tanjong Pagar being near the CBD, a resale flat there will surely be subject to a higher Cash-Over-Valuation.

2. Condition of the HDB Flat

Older resale flats that are well-maintained are often worth more and command a higher price tag; whereas, a run-down resale flat typically comes with a cheaper cost of value (COV). Flats that have undergone extensive renovations and come with stylish furnishings can also be more expensive.

3. Size and HDB Flat Type

If you’re looking to purchase a resale HDB maisonette or jumbo flat, you can expect to pay a higher Cash over Valuation (COV).

These types of flats are especially sought after due to their rarity, and consequently, they typically command a higher selling price.

HDB Valuation Report: Things to Note to Receive One

Before you take the plunge and submit a request to HDB for a valuation on a resale flat, take note of the following administrative matters – they must be considered before you receive your report!

You’ll need to pay an HDB valuation fee (aka admin fee) of $120 for the HDB valuation request.
You’ll need to submit the request by the next working day after the Option Date stated in the Option to Purchase.
Should HDB decide that a valuation is needed, they will assign the valuer for you.
If you’re happy with the HDB appraisal, you’ll need to take the extra step of submitting an application to purchase the resale flat.
If you’re pleased with the published value of your HDB flat on the HDB Resale Portal, you should submit your resale application within three months. Otherwise, you’ll need to make another request for HDB valuation.

What You Can Do to Get an Idea of the HDB Valuation and Reduce COV Amount

To gain a better understanding of the value of a HDB resale flat, arm yourself with knowledge!

Do your due diligence and explore the various methods available.

Gain an idea of the cost of resale flats in the estate by consulting the transacted resale flat prices on HDB!
Check out Listing Portals for HDB flats of a comparable size to the one that caught your eye – they might be in the same area or even estate!

By using these methods, you can get a general idea of what the selling price of an HDB resale flat should be. With that in mind, you can now use it as a starting point for negotiation with the seller.

Of course, do remember to negotiate, but be careful not to be too pushy with your bargaining, as it might put the seller off.

Should You Buy, Sell or Wait?

If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?

It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.

I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.

I can help you by:

Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.

You May Also Like …

All Blog Posts

SP Utilities Guide – Quick Guide To Setting Up Utilities In Singapore For Your New Home

Jayson Ang – April 16, 2023 –

TLDR Setting up utilities in Singapore for a new home is hassle-free. Contact SP Services for electricity and water accounts,...

All Reports

Finding Your Dream Home In The Near Future. Exciting Upcoming Property Launches In The First Half Of 2024

Jayson Ang – December 25, 2023 –

TLDR The real estate sector in 2023 saw significant policy shifts affecting both private and public housing, with various changes...

All Blog Posts Buying Tips Opinion

Why There’s No Perfect Time to Enter the Market

Jayson Ang – December 18, 2022 –

TLDR When it comes to property transactions, understanding the factors influencing rising prices is crucial. The pandemic has driven up...

All

Four Things to Avoid When Renting Out an HDB Flat

Jayson Ang – February 23, 2024 –

TLDR Renting out an HDB flat in Singapore can be a lucrative source of secondary income. Key considerations include adhering...

Mandarin Top 5

5 Factors : Why Singapore’s Property Market Is A Good Hedge Against Inflation

Jayson Ang – May 26, 2024 –

As inflation becomes a growing concern for investors worldwide, the stability of Singapore's property market has become an attractive option...

All Blog Posts Buying Tips Opinion

How Can You Prepare for Retirement in an Expensive Real Estate Market? Discover Your Options Now!

Jayson Ang – June 30, 2023 –

TLDR The article discusses the challenges of investing in a second property for retirement amidst Singapore's real estate market conditions....

All Blog Posts Buying Tips

Beware of These 7 Deceptive Tricks In Showflat Condo Sales

Jayson Ang – May 14, 2023 –

TLDR When navigating the complexities of the real estate market, it's crucial to be wary of hidden marketing tricks when...

Mandarin Top 5

5 Homeowners Share Their Biggest Regrets Delaying Their Property Purchase in Singapore

Jayson Ang – September 12, 2024 –

In the fast-paced and ever-evolving property market of Singapore, making a timely decision to purchase a property can make all...

All Blog Posts Top List

Discover the Top 11 Most Outstanding Condominiums in Singapore’s Holland Village Areas

Jayson Ang – December 9, 2022 –

Originally established in the early 1900s by Singapore's Dutch community, Holland Village was originally a residential area home to British...

Mandarin Top 5

Top 5 : Best Themed Cafes in Singapore

Jayson Ang – November 15, 2024 –

Singapore, a vibrant and diverse city, is known for its eclectic mix of cultures, cuisines, and attractions. Among the many...

Mandarin Top 5

The Top 5 Legal Considerations When Investing In A Property In Singapore

Jayson Ang – August 21, 2024 –

Investing in property in Singapore is an attractive option for many, given the country's stable economy and strong demand for...

All Blog Posts Buying Tips Top List

Expert Tips : Top Property Investment Strategies in Singapore

Jayson Ang – December 25, 2022 –

TLDR Singapore offers lucrative property investment opportunities with its stable economy and political climate. To succeed, investors should conduct thorough...

Mandarin Top 5

5 Most Affordable Areas to Invest in Property in Singapore

Jayson Ang – June 2, 2024 –

Singapore is known for being one of the most expensive cities in the world, particularly when it comes to property...

Mandarin Top 5

Top 5 Things to Do in Singapore on a Rainy Day

Jayson Ang – March 24, 2024 –

Singapore, the beautiful island city-state, is known for its sunny weather and stunning attractions. However, even in this tropical paradise,...

Mandarin Top 5

Top 5 Must-Try Foods in Singapore

Jayson Ang – July 12, 2023 –

Top 5 Must-Try Foods in Singapore Singapore, a melting pot of cultures and cuisines, offers a diverse and tantalizing array...

Mandarin Top 5

5 Impacts Of The Singapore-Malaysia High-Speed Rail On The Property Market

Jayson Ang – June 10, 2024 –

The proposed Singapore-Malaysia High-Speed Rail (HSR) is a joint project between the two countries that aims to improve connectivity and...

All

Mortgage Interest : The True Cost of Buying and Owning Properties in Singapore

Jayson Ang – March 16, 2023 –

TLDR When considering buying a property in Singapore, it's crucial to understand the true costs and risks involved. High monthly...

Mandarin Top 5

The Future Of Singapore Property Investing: 5 Trends To Watch Out For

Jayson Ang – July 10, 2024 –

The future of Singapore's property market is shaped by several emerging trends that reflect cautious optimism, enviable locations, and sociable...

All Blog Posts Opinion

Invest During the Bearish & Exit During the Bullish

Jayson Ang – December 27, 2022 –

TLDR A comprehensive overview of the real estate market trends, emphasizing the importance of strategic property analysis and investment decisions....