Cov Or Valuation

[jansenboy 0]

Newspaper report today that COV is going downwards thus it says "cooling measures" have worked.

One thing I don't understand is this. COV goes down but isn't it because Valuation go up? In that case why has the "cooling measures" work??

People are paying more for their flats. The only differences surely is that the bank is willing to lend them more. Are Singaporeans really that dumb to think that COV goes down means flats are more affordable or is that all they actually care about w/o regards what is the actual cost of the flats they are buying.

I go to Courts. have to put a 10% downpayment on $10,000 worth of items. Pay $1000

Now Courts charge me $12,000 but I only pay 5% so does that mean my funitures are more "affordable" now. Can someone explain where my logic went wrong or am I actually correct and MBT is trying to trick us into thinking he is doing a great job?

[gimz63251073 0]

U are right, prices are still going up. Just that the rate of increase is slower now.

Thats just a good way to sensationalise bad news.... frankly, if prices of HDB goes down, i think MBT would be in deeper trouble...

[neeravks 0]

U are right, prices are still going up. Just that the rate of increase is slower now.

Thats just a good way to sensationalise bad news.... frankly, if prices of HDB goes down, i think MBT would be in deeper trouble...

Everymonth, new valuation reports which come out take into account the Purchase Price of the flats in the surrounding area.

Note Purchase Price = VALUATION + COV

So in the previous sales in that area, even if there was 5K COV (which is considered LOW by the standards here) , the new valuation will still be up.

Thats not all, valuation report usually take the condition of the flat into account. So better the condition better the valuation. But the degree of COV a owner of a nicely done flat asks can sometimes be mind boggling....some owners are just plain greedy...no matter what the valuation they want X amount of COV.

So I dont think HDB can do much here. Its the sellers market. They demand and buyers pay. Thats it. the cooling measures have just removed some number of people from the market. Thats it. Its still a sellers market.

[therat 18]

the news just make it sound good.

Sound like.. those elite "boss" has did sth on those complain as election is coming soon.

U complain , COV high right.

No problem. new rule 'invented' . COV drop.

Valuation high right. No problem. Can use Bank or HDB loan on this.

Then u had more cash on hand.

Total cost price too high.

Cannot be.

HDB is affordable

[marshmallow 0]

Newspaper report today that COV is going downwards thus it says "cooling measures" have worked.

One thing I don't understand is this. COV goes down but isn't it because Valuation go up? In that case why has the "cooling measures" work??

People are paying more for their flats. The only differences surely is that the bank is willing to lend them more. Are Singaporeans really that dumb to think that COV goes down means flats are more affordable or is that all they actually care about w/o regards what is the actual cost of the flats they are buying.

I go to Courts. have to put a 10% downpayment on $10,000 worth of items. Pay $1000

Now Courts charge me $12,000 but I only pay 5% so does that mean my funitures are more "affordable" now. Can someone explain where my logic went wrong or am I actually correct and MBT is trying to trick us into thinking he is doing a great job?

you are right that the overall price of flats is still increasing unless COV goes negative. However, i do note that many pple are more concern about COV than the valuation (just my observation and opinion, feel free to comment/discuss ):

due to the CPF system, many Singaporeans are CPF rich, cash poor. Even with the higher price now, many people can still be able to buy a home IF no cash is involved - i.e. they have sufficient CPF funds for downpayment and sustainable monthly installment via CPF contribution.

However, most pple get stuck at the COV, cos a large part of our savings are locked in CPF (as i mentioned, CPF rich, cash poor). And normally, when do pple buy house? it's when they are undergoing major changes in their lives e.g. getting married, having children etc., that's also the time when they need a lot of cash on hand. COV will eat significantly into their cash fund.

Hence, lower COV is something "close to pple's hearts" - many actually don't mind paying higher valuation/housing loan in order to lower the cash outlay.

my $0.02

[Plastic3 0]

you are right that the overall price of flats is still increasing unless COV goes negative. However, i do note that many pple are more concern about COV than the valuation (just my observation and opinion, feel free to comment/discuss ):

due to the CPF system, many Singaporeans are CPF rich, cash poor. Even with the higher price now, many people can still be able to buy a home IF no cash is involved - i.e. they have sufficient CPF funds for downpayment and sustainable monthly installment via CPF contribution.

However, most pple get stuck at the COV, cos a large part of our savings are locked in CPF (as i mentioned, CPF rich, cash poor). And normally, when do pple buy house? it's when they are undergoing major changes in their lives e.g. getting married, having children etc., that's also the time when they need a lot of cash on hand. COV will eat significantly into their cash fund.

Hence, lower COV is something "close to pple's hearts" - many actually don't mind paying higher valuation/housing loan in order to lower the cash outlay.

my $0.02

True, because COV is paid up-front if don't even have the cash cannot buy a home at all,

loan can be paid slowly/take longer loan period, in a way not as pressing...main point is still can buy

Whether the cooling measures have worked really depends on how we look at it:

Since the measures are not aimed directly at lowering valuations, the only way for the valuations to drop is for the COV to drop & even become negative (sell below valuation) as it has happen in the past, most recently 1Q2009(slightly), 2Q2005(more drastic)

So actually the 1st step has worked, COV has dropped although it is more so for certain areas than others..

Will COV drop to value or negative?

With the economy/market going up again, it is unlikely....STI is back to about 3200pts(?), outlook is good for the near future (at least for the time being, with the global economy so closely interconnected anything can happen)

Why are the measures not aimed directly at Valuations?

If they are to tweak the valuations, it could create an even bigger problem, one which they will not be able to solve without drastic measures, imagine all flat owners' home prices falling at once...

Like many have said, price is still going up, but at a slower rate compared to 3Q2010-4Q2010, where both COV & Valuations increase at the same rate

Edited January 5, 2011 by Plastic3