With the construction of several housing projects, including BTO flats, delayed for a few years, you may be looking at the HDB resale market especially if you have an urgent for a home, or want a bigger space. However, with cash over valuation (COV) prices seeing a revival amid a robust resale HDB market after the circuit breaker, more people are paying above their resale flat’s HDB valuation.
If you’re a buyer looking to buy a resale HDB flat, obtaining the HDB valuation is important as it will determine both the housing loan and CPF amount that you can use. Whilst you must first agree on the price with the seller and sign the Option to Purchase (OTP) before getting the HDB valuation, you can still do your own research so that you won’t have to pay too much COV or cash in excess.
In this article, you’ll learn how HDB’s valuation will affect you, and some other key things you should note about it.
HDB Resale Valuation: An Overview
HDB resale valuation: What is it?
HDB’s estimation of how much the resale flat is worth.
What does the HDB valuation affect?
The amount of CPF savings you can use, loan amount you may take, and cash over valuation (COV) to pay.
How to get an HDB valuation report?
After signing the OTP, the buyer can submit a Request for Value.
HDB Resale Valuation: How Does It Work?
An HDB resale valuation is simply an estimation of how much the resale flat is worth and is part of your HDB resale application.
As a resale buyer, you’ll first need to negotiate with the seller on the selling price and pay him/her the option fee first before requesting for an HDB valuation.
Once the seller has granted you the Option to Purchase (OTP), you can then submit the valuation request to HDB.
If HDB decides that a valuation is indeed required to determine the value of the flat, an assigned valuer will come to the flat to inspect it.
Recommended article: Singapore HDB Resale Flat Price Guide (2021)
When it comes to HDB valuation, be sure to understand the amount of cash you’ll need to fork out for your flat
How Does HDB Valuation Affect HDB Resale Buyers?
The HDB valuation will determine the amount of CPF savings, housing loan, and the COV to pay for your resale flat.
Let’s say that you and the seller have agreed on the selling price of $725,000. You pay the OTP and submit the HDB valuation request. HDB’s official valuation of the flat, however, is $700,000. This would mean that you will be paying a COV of $25,000.
The amount of CPF savings and housing loan that you can use is based on the lower of the HDB valuation or price, in this example, it’s $700,000.
However, the COV will affect the stamp duty that you pay, namely Buyer’s Stamp Duty (BSD) and Seller’s Stamp Duty (SSD) as they are based on the higher of the HDB valuation or price. In short, COV would result in higher BSD and SSD.
The amount of CPF savings that you can use to pay for your resale flat is based on the remaining lease of the property.
Using the example above, you’ll be able to use your CPF savings up to the HDB valuation of $700,000 if the remaining lease of the flat is at least 20 years.
Here’s a more detailed table about the CPF usage:
Remaining lease of property is at least 20 years and can cover the youngest buyer until at least age 95
Buyer can use CPF to pay for the property up to the HDB Valuation Limit
Use of CPF will be prorated based on the extent of the remaining lease of the property can cover the youngest buyer to the age of 95. This will help buyers set aside CPF savings for their housing needs during retirement (e.g. a replacement property).
You may use the online calculator from CPF Board’s website to calculate the amount of CPF savings that you can use.
If you’re taking a loan from HDB or the bank, the loan amount is based on the HDB valuation amount, and not the selling price. Specifically, the Loan-to-Value (LTV) ratio of the resale flat will determine the maximum amount that you can borrow from HDB or the bank.
Type of loan
Loan quantum (based on $700k HDB valuation)
Up to $630k
Up to $525k
If you’re taking an HDB loan
For HDB loans, the LTV is 90%. Based on the valuation of $700,000, you can take up a loan of up to $630,000.
If you’re taking a bank loan
Let’s say the LTV of the bank loan is 75%. This means that you can use the bank loan of up to $525,000 to pay for the flat.
COV is essentially the difference between the selling price and the actual HDB valuation of the flat.
Since the housing loan (whether it’s from HDB or a bank) will only cover up to the HDB valuation amount, you’ll have to pay the balance in cash.
As explained in the example above, this means that you’ll have to pay the COV of $25,000 in cash.
In fact, HDB valuation played a huge role in the sky-high COV prices before the government introduced a cooling measure in 2014 to bring down property prices.
However, increased demand for resale flats has seen COV back in the spotlight again amid a resilient property market, which has seen more buyers paying COV for their choice flats.
How COV Worked Prior to 2014
Prior to 2014, the seller and the buyer would actually settle on the selling price of the flat after HDB’s valuation of the flat.
With the HDB valuation and COV prices published by HDB online, their negotiations would be largely focused on the COV.
For example, a request for HDB valuation would be submitted first. Let’s say the flat is valued at $700,000 by HDB. The buyer and the seller would then negotiate on the COV to be paid on top of this HDB valuation. Based on the past COV prices, they may agree on a COV of $35,000.
However, property prices had skyrocketed due to this practice, making it less affordable for buyers to buy a flat.
Sellers had hiked up the selling price to earn a higher profit. It got to a point where a maisonette in Bishan fetched a whopping COV price of $250,000 at the end of 2013.
So, the government introduced a few measures in 2014 to stabilise the property market.
HDB Valuations From 2014 Onwards
One of the changes made is that HDB valuations can only be done after the buyer and the seller have settled on the selling price.
HDB stopped publishing the COV prices as well, and removed those that were previously posted online. Currently, HDB publishes the selling prices of resale transactions daily.
This means that sellers cannot use the COV as a basis to hike up the selling price. The seller and the buyer will instead focus on negotiating the total selling price based on the prices of past resale transactions.
After agreeing on the selling price, the buyer will then get the HDB valuation done to know the amount of COV to be paid. This also prevents the seller from changing the selling price to earn a higher profit.
Let’s say the agreed selling price of the flat is $725,000. With an HDB valuation of $700,000, the COV will be fixed at $25,000.
Since then, the prices of HDB resale flats have gone down, making them more affordable for buyers. But as mentioned, there has been a recent comeback of the COV trend with HDB resale prices climbing 5% in 2020 alone.
What Are Some Factors That Affect the COV?
Various factors influence the COV that you’ll need to pay, but the main ones are:
Flat condition; and
Size of the flat
1. Location of the HDB Flat
Flats located close to amenities such as MRT stations, shopping malls, and schools tend to sell at a higher price. They’re also more likely to fetch a higher price if they’re located in mature estates, where more amenities are available for residents.
For convenience and accessibility, people are more willing to fork out a premium to buy these flats.
For example, a resale flat Bishan is more likely to sell above the flat’s valuation because of the flat’s location and surrounding amenities, compared to a flat located in Woodlands.
The same goes for buying a resale flat in Tanjong Pagar. Given its proximity to the CBD, it’s more likely that people will pay a higher COV for it.
2. Condition of the HDB Flat
Flats with extensive renovations and furnishings tend to fetch a higher price. People are also more likely to pay more for older resale flats, provided that they’re well-maintained.
On the other hand, if the resale flat that you’re thinking of buying looks run down, it’s more likely that the COV will be lower.
3. Size and HDB Flat Type
Larger flats in general command a higher selling price.
If you’re eyeing a rare type of resale flat, such as an HDB maisonette or jumbo flat, be prepared to fork out a higher COV. As these flat types are no longer in production, they’re highly in demand because of their rarity.
HDB Valuation Report: Things to Note to Receive One
Before you decide on buying the resale flat and submitting a request for HDB’s valuation, be sure to take note of the following administrative matters too:
You’ll need to pay an HDB valuation fee (aka admin fee) of $120 for the HDB valuation request.
You’ll need to submit the request by the next working day after the Option Date stated in the Option to Purchase.
Should HDB decide that a valuation is needed, they will assign the valuer for you.
If you’re happy with the HDB valuation, you’ll have to submit a separate application to buy the resale flat.
Once the value of the flat is published on the HDB Resale Portal and you’re satisfied with it, you’ll need to submit your resale application within three months. Otherwise, you’ll have to submit another request for HDB valuation.
What You Can Do to Get an Idea of the HDB Valuation and Reduce COV amount
To get a better sense of the HDB resale flat’s valuation, you can start with doing some due diligence. There are various methods for you to do so:
You can get an estimation of the price of resale flats in the estate by referring to the transacted resale flat prices on HDB.
You can also search for similar-sized HDB flats in the same area/estate on PropertyGuru as the one you are keen on getting.
Get an instant indicative valuation on PropertyGuru with the Quick Online Valuation tool
Each of these methods will give you a rough idea of the possible selling price range of the HDB resale flat.
With the baseline price in mind, you can then use that as a basis of negotiation with the seller. Make sure to negotiate with the seller so that you reduce as much COV as possible. But do also remember not to be too aggressive with your bargaining because it can indicate that you aren’t a genuine buyer and just turn off the seller.
Other FAQs About HDB Valuation:
How Can I Get My HDB Valuation Report?
This is usually done by the buyers or the hired agent. After an OTP has been granted by the seller to the buyer, a Request for Value may be submitted the next working day by logging into HDB e-Service with your NRIC number and SingPass.
How Long Does the HDB Valuation Report Process Take?
The HDB valuation request typically takes about seven working days to process. Once the seven days are up, you will receive the HDB valuation report with your HDB valuation price.
Can I Sell My HDB Flat Below HDB Valuation?
Yes, you can sell your HDB at any price that you want. With that in mind, the SSD is still charged based on the HDB valuation price.
What Is the HDB Request for Value?
Request for Value is a compulsory submission to HDB if you are a buyer who is financing a resale HDB unit with CPF savings or a housing loan (HDB/bank). That’s because the Request for Value will give you a HDB valuation price that will be used to calculate your loan quantum.
How Is the HDB Valuation Calculated?
Unfortunately, the formula for HDB valuation price is not disclosed to the public. However, you can still get the final HDB valuation price through the HDB Request for Value.
Alternatively, you can use PropertyGuru’s HDB valuation calculator to get an estimate of the HDB valuation.
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