Friday, April 2, 2010

Cash Over Valuation (COV) for HDB

Having bought a HDB flat directly from HDB itself, I never had to grapple with the issue of cash over valuation or what is commonly called COV.

If a flat is valued at $300,000 and the owner asks for a COV of $50,000 , the buyers literally have to fork out an extra $50K. This could potentially dry up the savings for a young couple who are thinking of getting their own place. I wonder whether any couple has put off marriage because of the high costs involved in setting up their own homes.

If it were me, the maximum COV that I will be willing to pay will not be more than 5% of the valuation of the flat. A 5% error in valuation is what I can accept as a logical explanation for the owner's refusal to sell. But to have to increase the valuation by 10% or 20% of the valued price seems a bit ridiculous to me. Either the valuation is wrong or the owner is really not keen on selling. Or am I mistaken?

What do you think? What is the maximum COV that you will be willing to pay for a HDB flat?


  1. Truth is property prices are market driven..and being the "cheapest" housing available, i think the demand for hdb flats are quite inelastic..hence people still end up paying despite the exorbitant COV.

    Of course, buying direct from hdb is the better option. But there are those who either don't qualify for a bto, or can't wait 2-3 years before getting their house.

  2. Property is all about location. Most of the time, it would be very hard to get a new flat with good location unless you are very lucky.

    Resale flat allows you to choose the location, and for good location be prepare to pay more for COV.

  3. Yep, in my mind I know that the demand for HDB will always be there. But what surprises me is that people are willing to dig so deep into their pockets to pay for prices that are way above the valuation price. Is it logical buying? Have they seriously thought through the finances part of it?

    So what is a reasonable COV that you guys will be willing to fork out?

  4. I'll be getting a resale flat soon, within 1 yr. Probably I'll have to pay a hefty cov value. How much? I'll TRY not to pay more than 50k. If it's 20-30k, it's quite fine with me.

  5. I started hunting for a 3 room resale flat in june 2007. The minimum COV I saw was no less than $15k for areas at Holland V, Tanjong Pajar, Chinatown, Tiong Bahru & Lavendar. I even saw 2 corner very well renovated units at Chinatown and Waterloo Street valued at 270k, asking for 420k and sold shortly later for 380k ! Yes, 110k COV for 3 room flat. Crazy ?
    I eventually settled for a really run down unit (they still had squatting pan with mosaic tiles !) on a high floor for 20k COV.

  6. Hi bummy,

    Thanks alot for sharing your interesting experience.

    110K COV is really high. It is amazing how much owners value their own flats and also how much buyers are actually willing to pay to get their flats.

    I am glad that you only had to pay 20K COV in the end.

  7. Hi MW,

    I am guessing that you bought directly from HDB?

    Why not try your luck at getting from HDB directly. It is a whole lot cheaper.

  8. Hi Ff,

    I need to get a good location with matured population. It can potentially increase my income by at least 1.5 times. The longer I wait, the more money I will potentially lose...hence the urgency and the reluctance to get a far off location with developing population.

    I treat my hdb as a machine to generate my income...hence the cov doesn't really matter much to me. Though I say that, who wants to pay more right?

  9. You are mistaken.


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