What Is Cash Over Valuation and How It Affects Your HDB’s Appreciation

Cash over valuation was a part of the negotiation process in the HDB resale market up until a few years back, before the government decided to step in to make policy changes. Today, we’re going to take a look at what it is, and how it affects a resale flat’s appreciation value.


Cash Over Valuation (COV): An Overview

What is COV?

Only applicable for HDB resale flats, COV is the difference between the sale price of the flat and its actual valuation.

How is COV paid?

Only by cash (CPF and housing loans cannot be used).

What affects COV?

Location, convenience and condition of the flat, as well as buyer’s urgency to move.


What is Cash Over Valuation?

Cash over valuation, or COV in short, is the difference between the sale price of a resale HDB flat and its actual valuation by HDB. Most often, the term is used when a buyer overpays for the unit. An example of its calculation:

Agreed sale price of flat between seller and buyer


Actual valuation of the flat by HDB


Cash over valuation (COV)

$530,000 – $500,000 = $30,000

In other words, the buyer is ‘overpaying’ the resale flat by $30,000. This amount, unfortunately, cannot be covered by your housing loan or CPF and must be paid for in cash.

The maximum amount in which you are entitled to borrow to finance the home, otherwise known as your Loan-To-Value ratio (LTV), is based on the valuation of the property, or the purchase price – whichever that is lower. Using the above figures as example:

If you’ve taken up a HDB housing loan,

The LTV is 90% of the valuation (as it is lower than the purchase price of the unit). Based on the valuation of $500,000, you can take up a loan of up to $450,000. 

If you’ve taken up a bank loan,

The LTV is capped at 75% of the valuation. Hence, the maximum loan you may take up is $375,000.

This means that on top of the deposit for the flat, your COV will need to be covered in cash. 

Read more on the breakdown of fees here: How to Pay for a Resale HDB Flat: A Step-by-Step Guide



Want to save more on your existing mortgage? Compare the best home loan rates in town or check out PropertyGuru Finance for more personalised advice and recommendations:


How COV affects Stamp Duty

Conversely, the stamp duties involved are based on the higher price of the valuation and the purchase price. In the case of the example above, your Buyer’s Stamp Duty (BSD) and Seller’s Stamp Duty (SSD) (if applicable) is based on the purchase price of $530,000.

It is important to note that COV almost only happens with HDB resale flats, as Built-to-Order (BTO) flats are purchased from HDB, so the valuation will always be the same as the selling price. 

If the jargons above confuse you, here are some of our other articles that may help:

  • HDB Valuation: What HDB Resale Buyers Need to Know
  • How to Pay for a Resale HDB Flat: A Step-by-Step Guide
  • HDB Resale Levy: What Second-Timer HDB Buyers Need to Know


A brief history of HDB COV 

Weirdly enough, buyers and sellers in the HDB resale market in the past would negotiate using COV as a benchmark instead of using the official valuation as a guide.

HDB resale sellers would get the valuation of their flat first, and then negotiated with buyers over COV. Needless to say, this resulted in sharp price hikes. 

In 2011, COV prices had reached a dizzying high  a buyer of a resale flat could end up paying a COV as high as $36,000. One maisonette unit in Bishan had a COV of $250,000 and became one of the first HDB flats to exceed a price of $1 mil.

Some Singaporeans started worrying that housing would be unattainable for future generations due to the rising prices. Yet others said the system should continue  after all, most still want to profit from their flat. And if a buyer is willing to pay more than the value, why not?

Then in March 2014, HDB decided to get rid of COV and stopped publishing COV prices. Additionally, a new system was put in place whereby prices of flats are negotiated among buyers and sellers first before the COV is made known.

Only once the price is decided on and the buyer pays the Option to Purchase (OTP) fee, will they get an official valuation from HDB. The difference between the offered price and the actual valuation becomes the COV. 

This, of course, can be tricky for both buyers and sellers – especially those that are uninformed – since they don’t know the actual valuation of the flat. So for example, say if you and the seller decided to settle at a price of $500,000 but the actual value of the flat is $490,000, it would mean that you’ll have to forfeit $10,000.

However, if the actual value is $520,000, it means that you saved $20,000 and got yourself a steal. 

This new policy worked; by 2015, the median COV prices had fallen close to $32,000. A year later, almost 80% of all resale HDB flat transactions were sold without COV. Today, COVs are a rare occurrence.


But is COV gone for good?

Not quite. While COV is no longer the norm in the resale market these days, it can still happen if you’re too aggressive with your offer, or if you’re not informed well enough. Remember to always secure the OTP before getting the official valuation from HDB. If you want to get an estimation of resale flats in the estate, search and compare HDB resale flat prices in the area on PropertyGuru. 


Four things that influence COV

While COV is no longer the norm in the resale market these days, there are many factors that affect COV, but some of the big ones are:

#1. Location/Accessibility

People are willing to pay higher asking prices for a flat in an attractive location or with easy access to public transport. This is especially so for the latter since owning a car is very expensive in Singapore.

Apartments that are near MRT stations or have many bus routes are an attractive prospect. The same goes for apartments that are near the CBD or town area.

Read also: How Does Distance to MRT Affect Property Prices in Singapore?

#2. Amenities nearby

Everyone loves convenience. An apartment in a location that boasts many facilities nearby such as supermarkets, food courts, and sports centres can command a higher price. Parents with young children may also be willing to pay a premium for locations with good schools in the vicinity. Generally, flats in older estates will be higher in price, as amenities would have built up over time in the estate.

#3. Condition and size of the flat

Even though your flat may be older, this doesn’t necessarily mean that the value of your flat is lesser. A prospective buyer won’t offer as much if the flat is run-down, as they’ll have to pay for renovations or restorations later. The same can be said of a flat that has extensive renovation work   if the buyer doesn’t like the renovations, they won’t offer much.

In general, the larger the flat, the higher the expected asking price. Some flat types command a higher price due to their scarcity. One example is the maisonette, which is no longer being built.

If you’d like to estimate the value of your property, a good way is by looking up the prices of other resale flats in your estate. Check how much they have sold for. This way, you won’t undervalue it, but you also won’t inflate it to an unrealistic amount.

#4. Buyer’s urgency to move

Resale HDB home-seekers are often also the group who are unable or unwilling to wait out three to five years for a BTO. And within this group are buyers who are looking to move into their new home right away. For whatever the reasons, expediting the sales process may lead to the acceptance of a higher transaction price.


More FAQs related to COV:

How does cash over valuation work?

COV is the difference in amount between the sale price of the flat and its actual valuation.

How is HDB valuation calculated?

This is typically based on the market value of the units in the same area. HDB may decide to assign a valuer to the flat to determine its valuation. 

Can COV be paid by CPF?

No, COV cannot be covered by CPF or any housing loans. It is paid in cash.

What happens if the valuation is higher than the purchase price?

The transaction will still follow through, as the seller is obliged to sell the flat at the agreed price once OTP has been granted.


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