Fixing COV not the solution: Minister

High cash-over-valuation (COV) prices paid by Housing and Development Board flat buyers are a concern, acknowledged National Development Minister Mah Bow Tan, as they make resale flats less accessible to buyers who need flats urgently.

But the way to deal with the situation “is not to manage or fix COVs”, he feels, as “the underlying cause is high demand, caused by excess liquidity and market sentiments, and low supply”.

Latest statistics from HDB showed that 93 per cent of resale transactions in the last quarter were above valuation, and the median COV paid by home buyers jumped 100 per cent – from $12,000 in Q3 to $24,000 in Q4.

But positive COVs, Mr Mah said, is not something permanent. The median COV was zero in 2005 when the property market was down, and “minimal” at $2,000 and below, a year later.

He urged flat buyers to be cautious about over-paying for their flats.

“Do your homework and remember also that not all COVs that buyers ask for are realistic,” he said. “In the free market, buyers and sellers must be free to ask and offer as they choose. But neither party is forced to accept what the other party wants.”

Mr Mah made these remarks in a wide-ranging interview with People’s Action Party Policy Forum chairman Satwant Singh and touched on topics such as the Build-To-Order system, the rationale for keeping to the current income ceiling and the pricing of HDB flats.

“My biggest challenge is to provide affordable housing that meets the rising expectations of a new generation of Singaporeans, while keeping within my housing budget,” said Mr Mah in the interview, which was published on the party’s website.

Currently, the percentage of households with arrears in mortgage instalments is about 7.4 per cent.

Source : Today – 13 Feb 2010