Your search results

What Is Cash Over Valuation in HDB (COV)

Posted by Jayson Ang on November 8, 2023

| 0

TLDR

Cash Over Valuation (COV) in HDB resale flats occurs when the purchase price exceeds HDB’s valuation. COV cannot be covered by loans or CPF funds and must be paid in cash. Factors influencing COV include location, amenities, flat condition, and buyer’s urgency. HDB stopped publishing valuations in 2014, leading to a decline in COV cases. COV impacts stamp duty calculations. Buyers and sellers should consider these factors before agreeing on a price.

Cash over valuation (COV) occurs when the price of a resale HDB flat exceeds the valuation set by HDB. The difference between the purchase price and HDB’s valuation is known as the COV amount.

In the past, prospective buyers could easily access HDB’s valuation of resale flats on their website. However, since 2014, HDB has ceased publishing these valuations. Nowadays, buyers and sellers can only view HDB’s valuation after they have agreed upon a purchase price.

This means that there is no foolproof method to determine in advance whether COV will be required. Nevertheless, it is important to consider four key factors that influence the COV amount when purchasing a resale HDB flat. If you are interested in buying an HDB resale flat, continue reading before accepting the seller’s asking price.

What Is Cash Over Valuation (COV): An Example

The buyer’s COV can be determined by subtracting HDB’s valuation of the HDB resale flat from the purchase price, as shown in the example above (i.e. $530,000 – $50,000 = $30,000). This calculation provides the amount of Cash Over Valuation incurred.

Can HDB COV Be Paid With a Home Loan?

Your Loan-to-Value limit (LTV) determines the maximum amount you can borrow as a percentage of the property’s price. This limit is based on the lower value between the purchase price and HDB’s valuation of your HDB resale flat.

It is important to note that when it comes to HDB resale flats with Cash Over Valuation (COV), the purchase price is always higher than HDB’s valuation. As a result, it is not possible to include the COV amount in your HDB loan, bank loan, or even CPF Ordinary Account (OA).

In summary, COV cannot be covered by any form of loan or CPF funds. It must be paid in cash.

How HDB COV Affects Stamp Duty

Even though COV cannot be counted as part of the property’s price for home loans, it is considered when determining the amount of Buyer’s Stamp Duty (BSD) and Seller’s Stamp Duty (SSD) payable by buyers and sellers of HDB resale flats, respectively. This is because stamp duty is based on the higher of the two values: the purchase price and HDB’s valuation of your HDB resale flat.

This means that for an HDB resale flat sold at $530,000 and valued by HDB at $500,000, the BSD payable will be calculated as such (based on the Budget 2023 announcements):

Total BSD amount: $1,800 + $3,600 + $5,100 = $10,500

How to ‘Avoid’ COV for HDB Resale Flats

The exact amount of Cash Over Valuation (COV) for a specific HDB resale flat cannot be determined until both the buyer and seller agree on a purchase price. COV cannot be financed through home loans or CPF, and it is taken into account for stamp duty purposes.

Ultimately, property buyers in Singapore are looking to get the best value for their money. Many would like to avoid situations where they realize they have technically paid more than the HDB’s valuation for their resale flat.

So, what are some clear indications that you might be at risk of incurring COV?

Factors That Influence COV for HDB Resale Flats

1. Highly Sought-After Venue with Excellent Public Transport Connectivity

People are willing to pay a premium for flats located in desirable areas or with convenient access to public transportation. This is particularly true in Singapore, where owning a car is prohibitively expensive.

Flats situated near MRT stations or with multiple bus routes are highly sought after. The same applies to flats that are in proximity to the Central Business District (CBD) or city center.

2. Enhanced Access to Lifestyle Amenities

Convenience is highly sought after by all individuals. A residence situated in an area that offers a multitude of amenities like grocery stores, dining options, and recreational centers can fetch a higher price in the market. Moreover, parents with young kids may be willing to pay extra for homes located near reputable schools. Typically, older HDB resale flats in established neighborhoods tend to be more expensive due to the gradual development of amenities within the vicinity over time.

3. The state and layout of the HDB resale flat

Despite being older, the value of your HDB resale flat may not necessarily be lower. Potential buyers are less likely to offer a high price if the flat is in poor condition, as they would have to spend on renovations or repairs later on. Similarly, if a flat has undergone extensive renovations that the buyer does not like, they may not offer much.

In general, larger HDB resale flats tend to have higher asking prices. Certain types of HDB flats, such as maisonettes, are more expensive due to their limited availability.

If you want to estimate the value of your HDB resale flat, a useful approach is to research the prices of other similar listings in your area on PropertyGuru. Take note of how much they have sold for. This way, you can avoid undervaluing or setting an unrealistic price for your flat.

4. The Time Sensitivity of the Buyer’s Move

Buyers of resale HDB flats are often those who cannot or do not want to wait for around 3.5 years to get a BTO flat. Among this group, there are buyers who want to move into their new home immediately. Whatever the reason, expediting the sales process may result in the buyer accepting a higher price for the transaction.

Are HDB Resale Flats in 2023 Prone to COV?

Since 2014, HDB has ceased publishing their HDB resale flat valuations. As a result, sellers have lost the reference point to determine their asking prices. Consequently, COV prices have experienced a significant decline, with nearly 80% of all resale HDB flat transactions in 2016 being sold without COV.

During the peak of the COVID-19 pandemic, there has been a resurgence of COV in the robust HDB resale market following the circuit breaker period. This can be attributed to construction delays, the postponement of BTO projects, and the increased demand for larger homes. The typical range for COV figures is between $10,000 and $50,000. However, buyers have been willing to pay as high as $200,000 in COV for select flats.

It is important to note that COV can still occur if you make an overly aggressive offer or if you lack sufficient information. Therefore, it is advisable to secure the Option to Purchase (OTP) before obtaining the official valuation from HDB.

If you wish to obtain an estimation of resale flats in a specific estate, you can reach out to me to find out!

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 Opinion

Discover the 7 Unique Attributes of Real Estate Investing

Jayson Ang – January 16, 2023 –

TLDR The post highlights the benefits of investing in real estate, such as high leverage, capital appreciation, income generation, usability,...

All Buying Tips Opinion

My 6 Factors to Consider When Buying a Property in 2023

Jayson Ang – March 11, 2023 –

As the housing market shows no signs of slowing down, many of us may feel left behind, questioning whether it...

Mandarin Top 5

From Garden City to Smart Nation: Singapore’s Top 5 Goals Building a Sustainable and Livable City

Jayson Ang – February 20, 2024 –

Singapore is a small island city-state with a population of over 5 million people. Its urban landscape is constantly evolving,...

All Opinion

Unseen Dangers of Putting Your Money in Upscale Freehold Properties in Singapore

Jayson Ang – February 17, 2024 –

TLDR Luxury freehold properties in Singapore may not always be the lucrative investment opportunities they appear to be. High-end properties...

All Blog Posts Opinion

How Can Real Estate Investment Help You to Combat Inflation?

Jayson Ang – January 28, 2023 –

TLDR When it comes to real estate investments in Singapore amidst rising inflation rates, consider strategies such as capitalizing on...

Mandarin Top 5

Is Singapore’s Property Market on the Verge of a Crash? Understanding the 5 Factors at Play

Jayson Ang – March 31, 2024 –

The Singapore property market has long been an attractive option for both local and international investors. However, as with any...

All Buying Tips

What Type of Properties Can a Permanent Resident PR Buy in Singapore?

Jayson Ang – August 13, 2023 –

TLDR When it comes to purchasing property in Singapore as a Permanent Resident or Foreign National, there are specific restrictions...

Mandarin Top 5

Top 5 Reasons Why Singapore’s Luxury Property Market Is Booming – Expert Analysis!

Jayson Ang – October 17, 2024 –

Singapore's luxury property market has been experiencing a significant boom in recent years, attracting the attention of investors and high-net-worth...

All Buying Tips

5 Exciting Trends Shaping Singapore’s Property Market for Future Buyers After 2024

Jayson Ang – July 5, 2024 –

TLDR When it comes to the evolving landscape of property development in Singapore, developers are facing new challenges and opportunities....

All Buying Tips

Want To Buy A Property? Read Me First!

Jayson Ang – December 7, 2022 –

TLDR Understanding the key factors involved in buying property in Singapore is crucial for making informed decisions. Consider your investment...

All Opinion

The 99-to-1 Property Split Strategy: Legality and Risks

Jayson Ang – May 15, 2026 –

TLDR The 99-to-1 property ownership split in Singapore, where one spouse holds 99% and the other 1%, is used to...

All Buying Tips Opinion

7 Essential Considerations to Keep in Mind When Assessing a Floor Plan for a New Condominium Development

Jayson Ang – March 6, 2024 –

TLDR When selecting a property unit, carefully examine the floor plan beyond aesthetics. Consider non-living spaces like ledges and void...

All Blog Posts Buying Tips

Should We Upgrade to a Condo Now or Wait for Interest Rates to Go Down?

Jayson Ang – January 18, 2023 –

TLDR Considering the Singapore property market trends and financial factors, it's crucial to make informed decisions about upgrading from an...

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...

All Buying Tips Opinion Selling Tips

Why Older Freehold Condominiums Are Losing Their Edge in En‑Bloc Deals (2025)

Jayson Ang – April 14, 2026 –

TLDR Older freehold condominiums in Singapore are losing their edge in en‑bloc deals due to several structural shifts. Developers increasingly...

All Opinion Selling Tips

Selling Your Singapore Condo? Don’t Overlook This Critical Factor

Jayson Ang – March 14, 2026 –

TLDR When selling a condo in Singapore, the number of units listed in the same development plays a crucial role....

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,...