How to save by buying with less cash for HDB resale flats
December 2nd, 2008 by ALVIN SOONG
HDB resale flat sales volume was steady in 1997 when the Asian financial crisis began. The following year, when retrenchments rose, sales volume shot up. One reason - many downgraded from private properties. The private home market is at a standstill and prices have fallen as the global financial crisis scares buyers away. Yet, the HDB resale flat market remains active and prices are still fairly strong.
However, there are increasing signs that this segment of the market is no longer immune to the economic slowdown. While prices have not dropped, the cash amount that buyers typically pay on top of the flat’s valuation has fallen more significantly, experts said. This cash-over-valuation sum - or what the market refers to as the COV - is usually a must for most transactions, especially in a booming market. Now that the HDB market outlook is less upbeat, some deals are even likely to be done at valuation, which means no COV is required.
There are also more ads asking for zero cash,’ she said. ‘Old flats that need a lot of renovation could be sold for zero cash.’ The Housing Board’s third quarter data showed that COVs mostly ranged from $10,000 to as much as $50,000. The overall median COV was $19,000, down from $20,000 in the second quarter and $21,000 in the first. It rose to a high of $22,000 in last year’s fourth quarter, from $17,000 in the third quarter and just $7,000 in the second.
Within the HDB market, the segment for small flats will likely be busier than the one for bigger flats. Already, property experts say the market for bigger flats - five-room flats and executive flats - have started to slow down. The prices of bigger flats could fall by 1 to 2 per cent in the fourth quarter. Prices of smaller flats could remain steady. In any case, HDB flat prices are largely more manageable than the price of a private home.
‘In challenging times, homebuyers tend to spend less by falling back on what is deemed a safer and more affordable housing option’ than private homes, according to a recent ERA study. It also noted that HDB resale flat sales volume was steady in 1997 when the Asian financial crisis began. The following year, when retrenchments rose, sales volume actually shot up by 57 per cent to 49,618 units.
Summarised from Straits Times 30th Nov
