[SINGAPORE] The Housing Development Board (HDB) is overhauling the procedure for resale HDB transactions in a bid to shift the focus from cash-over-valuation (COV) to market prices when negotiating resale prices.
It is requiring buyers to first obtain the option to purchase (OTP) before asking for a valuation through HDB - and it will not accept valuation requests from sellers.
This pushes buyers and sellers into negotiating resale prices based on the latest transacted prices, instead of haggling over the COV as is done now.
Minister for National Development (MND) Khaw Boon Wan said in Parliament yesterday: "The HDB will rationalise the process of price negotiations and restore the original intention of valuation - which is to help buyers obtain a housing loan."
Negotiating resale prices based on COV was "an anomaly unique to the HDB resale market"; doing so based on price instead will take some getting used to, but is a useful move for the sake of long-term market stability, he said.
With the change, buyers who are granted the OTP will have 21 calendar days - up from 14 - to exercise the OTP.
At the same time, HDB will start posting daily prices of resale transactions on HDB InfoWEB as soon as they are registered, instead of fortnightly.
Since 2007, HDB has been publishing the COVs as a service to people shopping for flats with lower COVs, but sellers started using the published COVs as benchmarks to bargain for even higher COVs.
Sellers or their sales agents had been typically requesting HDB valuations and then negotiating resale prices with prospective buyers of their flats based on COV, which is the cash premium that buyers would pay in excess of the valuation.
Changing the resale procedure will bring the practice in the HDB resale market in line with the private housing market, as some Members of Parliament have lobbied for in the past.
A HDB spokeswoman said that the board will still publish COV data by town every quarter on the HDB InfoWEB, but it will monitor reactions to the new measures and assess whether it remains meaningful to do this.
Property consultants noted that the present low COVs provide a good opportunity for the new resale process to be introduced without major protests from sellers.
Nicholas Mak, the head of research at SLP International, said that the "preoccupation with COVs as a basis for price negotiations could lead to more turbulent market behaviour, with larger upswings or downswings".
But Mohd Ismail, the chief executive of PropNex Realty, cautioned that buyers may be more vulnerable to a greater cash outlay under the new procedure if there is a gap between the agreed price and the valuation price. "Buyers will become more cautious in their offer price as they enter into a purchase without an indication of how much the property is worth," he said.
On the likelihood that there may be sellers who may still fish for valuation reports through the HDB, the board said that it will monitor the new resale procedures.
The HDB spokeswoman said: "If there are salespersons who try to game the system to obtain valuations, we will carry out relevant investigations, together with the Council for Estate Agencies (CEA)."
ERA Realty key executive Eugene Lim said that the new procedure was unlikely to be abused, given that the name of the buyer seeking a valuation report has to be the same as the one on the OTP.
Referring to the measures to cool the property market, Mr Khaw told Parliament that there were signs that the market was "turning the corner", but that it was still premature to withdraw the measures.
The government is moderating both the Build-to-Order (BTO) programme and Government Land Sales. More than 77,000 BTO flats have been launched in the past three years, of which 14,000 units were completed last year; 28,000 units will be handed over this year.
The tightening of the property market here has already led some Singaporeans to look for foreign properties.
Mr Khaw counselled caution, as there are added risks and complexities arising from different legal and regulatory frameworks operating outside Singapore.
The CEA will launch an online guide for those thinking of buying a foreign property. It will also step up its effort to regulate estate agents marketing overseas property developments here.