So you’ve decided to get a new HDB resale flat, and are lucky enough to have found one that appears to tick all the right boxes. It’s spacious, well furnished, and close to the MRT and tons of amenities. But when it comes to paying for this future home of yours, did you know you’ll first need HDB’s valuation of the property if you’re financing the flat with your CPF, or a loan from HDB or a bank?
Read on to learn more about how HDB’s valuation will affect you, and some other key things you should note about it.
HDB Valuation: an Overview
HDB Valuation: What is it?
HDB’s estimation of how much the resale flat is worth.
What does 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 a HDB valuation report?
After an OTP has been granted by the seller to the buyer, a Request of Value may be submitted the next working day by logging into HDB e-Service with your NRIC number and SingPass.
HDB’s valuation of resale flat: What does it work?
HDB’s valuation of the resale flat is, simply, an estimation of how much the resale flat is worth.
If you’re buying a resale HDB flat with your CPF savings, or a housing loan from HDB or a bank, you’ll need to submit a Request for Value from HDB.
As a resale buyer, you’ll have to negotiate with the seller on the selling price and pay him/her the option fee first before requesting for this 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.
How does HDB’s valuation affect HDB resale buyers?
The HDB valuation will determine the amount of CPF savings, housing loan, and the cash over valuation (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 submit the valuation request, and HDB decides that the flat is valued at $700,000.
The amount of CPF savings, housing loan, and COV to be used will be based on this $700,000, in which the remaining $25,000 is the COV to be paid in cash.
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 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 youngest buyer until at least age of 95
Buyer can use CPF to pay for the property up to the Valuation Limit
Use of CPF will be prorated based on the extent 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 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.
If you’re taking a 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 stands for cash-over-valuation, and is essentially the difference between the selling price and the actual valuation of the flat.
Since the housing loan (whether it’s from HDB or a bank) will only cover up to the valuation amount, you’ll have to pay the balance by cash.
Based on the above example, 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.
How things 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 valuation and COV prices published by HDB online, their negotiations would be largely focused on the COV.
For example, a request for HDB’s valuation would be submitted first. Let’s say the flat is valued at $700,000.The buyer and the seller would negotiate on the COV to be paid on top of this valuation. Based on the past COV prices, they might 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 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 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 a valuation of $700,000, the COV will be fixed at $25,000.
Since then, the prices of HDB resale flats have gone down, making it more affordable for buyers.
What are some factors that affect the COV?
Various factors influence the COV that you’ll need to pay. The main ones are location, condition, and the size of the flat.
1. Location of the flat
Flats located close to amenities such as MRT stations, shopping malls, and schools tend to be sold 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.
Let’s say you’re planning to buy a resale flat in Bishan and the selling price is well above the valuation. You’ll probably be more willing to accept the price and pay a higher COV if you’re buying it to increase your son’s chance of winning a spot at Raffles Institution.
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 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 of the flat
Larger flats in general command a higher selling price.
If you’re eyeing an older type of resale flat, such as the maisonette, be prepared to fork out a higher COV. Since maisonettes are no longer built, they’re rarer and harder to get.
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 admin fee of $120 for the HDB valuation.
- 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 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 3 months. Otherwise, you’ll have to submit another request for HDB valuation.
More FAQs on 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 of 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 take to process?
Typically, seven working days.
Can I sell my HDB flat below valuation?
Yes, you can sell your HDB at any price that you want. With that in mind, a seller’s stamp duty 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).
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