HDB COVs plunge to $0

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After drops across all flat types of at least $10,000, HDB’s Cash Over Valuation (COV) for 1Q09 finally hit rock bottom for the larger flats with $0 COV recorded. These were especially evident in core areas such as Marine Parade, Queenstown, Kallang, Bukit Merah and Bishan.

“This sharp drop in COVs ,” explains PropNex CEO Mohamed Ismail, “is due to increasing public resistance to paying above what are already higher valuations.”

Higher HDB valuations are why the Resale Price Index (RPI) only dipped by 0.8%, the first drop in nine quarters, despite drastically decreased COVs.

“It is heartening to note,” points out Mohamed Ismail, “that even at 138.3, the RPI still has not fallen below the previous peak of 136.9 in 4Q96.

“It is evident that public housing remains resilient in this gloomy economy, thanks to continued strong demand for resale flats. The alternatives, BTO and DBSS projects, are still years away from completion.”

Looking at the current economy, Mohamed Ismail forecasts increased demand for 3- and 4-room flats for the rest of the year, based on the fact that people are still willing to pay COV for these flat types.

“Overall,” predicts Mohamed Ismail, “HDB’s RPI for 2009 can be expected to drop by another 5% or so, mainly due to the continued decline in the prices for 5-room and executive flats.”

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HDB COVs plunge to $0

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