Note: On 15 January 2024, Minister of National Development Desmond Lee announced that fewer resale flat buyers paid cash over valuation (COV) in 2023, compared to 2022. This article has been updated to reflect this news.
Cash over valuation (COV) is incurred when the purchase price of an HDB resale flat is higher than HDB’s valuation of that HDB flat; the difference between the purchase price and HDB’s valuation is the COV amount.
In the past, prospective buyers of HDB resale flats could look up HDB’s valuation of that HDB resale flat on HDB’s website. Since 2014, however, HDB stopped publishing their valuations of HDB resale flat prices. Today, buyers and sellers can only see HDB’s valuation of specific HDB resale flats after they have agreed on a purchase price.
This means that there’s no foolproof way of finding out beforehand if you’ll be paying HDB COV. However, four key factors influence HDB COV you should be aware of. Interested in buying an HDB resale flat? Read on before agreeing to a seller’s asking price.
What Is Cash Over Valuation? (Video)
What Is Cash Over Valuation (COV): An Example
| Purchase price of an HDB resale flat | $530,000 |
| HDB’s valuation of that flat | $500,000 |
| COV incurred by the buyer | $30,000 |
Based on the example above, the COV incurred by the buyer can be calculated by the difference between the purchase price and HDB’s valuation of the HDB resale flat, (i.e. $530,000 – $50,000 = $30,000).
Can HDB COV Be Paid With a Home Loan?
| Type of loan | HDB loan | Bank loan |
| LTV limit | 80% | 75% |
| How much can you borrow for an HDB resale flat valued at $500,000 | 80% x $500,000 = $400,000 | 75% x $500,000 = $375,000 |
Your Loan-to-Value limit (LTV) – the maximum percentage of a property’s price you can borrow – is based on the lower of the two values: the purchase price and HDB’s valuation of your HDB resale flat.
Since the purchase price of an HDB resale flat that incurs COV is always higher than HDB’s valuation, it ultimately means that you cannot ‘borrow’ your COV amount via an HDB or bank loan.
Tl;dr, no, COV cannot be covered by your HDB loan, bank loan, or even CPF Ordinary Account (OA). 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):
| BSD rate | BSD amount | The remainder of the HDB resale flat’s price left to incur BSD |
| 1% of the first $180,000 | $180,000 x 1% = $1,800 | $530,000 – $180,000 = $350,000 |
| 2% of the next $180,000 | $180,000 x 2% = $3,600 | $350,000 – $180,000 = $170,000 |
| 3% of the next $640,000 | $170,000 x 3% = $5,100 | $0 |
Total BSD amount: $1,800 + $3,600 + $5,100 = $10,500
How to ‘Avoid’ COV for HDB Resale Flats
Now you know: the actual COV amount (and if it even exists for a particular HDB resale flat) cannot be determined until a buyer and seller agree on a purchase price, it cannot be covered by home loans and CPF, and it is considered for stamp duty.
And at the end of the day, Singapore property buyers want to get the best bang for their buck. Many would want to avoid a situation where they realise after agreeing on a purchase price for their HDB resale flat that they technically ‘overpaid’ for it, based on HDB’s valuation.
What then are some of the telltale signs that you may be on the verge of incurring COV?
Factors That Influence COV for HDB Resale Flats
1. Popular Location and Accessibility to Public Transport
People are willing to pay higher asking prices for a flat in an attractive location or with easy access to public transport. This is especially so for the latter since owning a car is very expensive in Singapore.
Apartments that are near MRT stations or have many bus routes are attractive prospects. The same goes for apartments that are near the CBD or city centre.
2. Availability of Lifestyle Amenities
Everyone loves convenience. An apartment in a location that boasts many facilities nearby such as supermarkets, food courts, and sports centres can command a higher price. Parents with young children may also be willing to pay a premium for locations with good schools in the vicinity. Generally, HDB resale flats in older estates will be higher in price, as amenities would have built up over time in the estate.
3. Condition and Size of the HDB Resale Flat
Even though your HDB resale flat may be older, this doesn’t necessarily mean that its value is lower. A prospective buyer won’t offer as much if the HDB resale flat is run-down, as they’ll have to pay for renovations or restorations later. The same can be said of a flat that has extensive renovation work – if the buyer doesn’t like the renovations, they won’t offer much.
In general, the larger the HDB resale flat, the higher the expected asking purchase price. Some HDB flat types (e.g. maisonettes) command a higher price due to their scarcity.
If you’d like to estimate the value of your HDB resale flat, a good way is by looking up the prices of other HDB resale flats listings in your estate on PropertyGuru now. Check how much they have sold for. This way, you won’t undervalue it, but you also won’t inflate it to an unrealistic amount.
4. Buyer’s Urgency to Move
Resale HDB flat buyers are often also the group who are unable or unwilling to wait out the approximate 3.5 years for a BTO flat. Within this group are buyers who are looking to move into their new home right away. For whatever reason, expediting the sales process may lead to the acceptance of a higher transaction price.
Is COV Common Among HDB Resale Flats in 2024?
Since HDB stopped publishing their HDB resale flat valuations in 2014, sellers no longer had benchmarks to base their asking prices on. COV prices fell drastically, and by 2016, almost 80% of all resale HDB flat transactions were sold without COV.
During the peak of the COVID-19 pandemic, it was reported that COV has seen a revival amid a robust HDB resale market after the circuit breaker period, driven by construction delays, BTO projects being pushed back as well as demand for bigger homes. Typical COV figures range between $10,000 and $50,000, but willing buyers were also forking out COV as high as $200,000 for choice flats.
According to HDB Q4 2023 flash estimates, 15% of HDB resale flat buyers paid for COV in Q4 2023, compared to almost 30% who did so in Q4 2022. In tandem, the price growth of HDB resale flats has also moderated. Nonetheless, COV can also still happen if you’re too aggressive with your offer, or if you’re not informed well enough. Remember to always secure the Option to Purchase (OTP) before getting the official valuation from HDB.
If you want to get an estimation of resale flats in the estate, search and compare resale flat prices in the estate that you’re interested in on the HDB Flat Portal, or you may also search for similar flats in the area/building on PropertyGuru now.
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