Let us look at this matter objectively. In 2010 and 2011, certain Singaporeans paid COV figures in the tens of thousands and even past a hundred thousand for flats in estates such as Pasir Ris, Sengkang, Punggol, Yishun, Jurong West, etc... Basically outskirts. How did this happen? There was a shortage in supply to meet the growing demand. Let us assume a 5 room flat in Punggol with a valuation of $500,000 and the buyer pays $50,000 cash over valuation. Assuming he takes a bank loan instead of a HDB loan, he would have to fork out 5% of the valuation in cash ($25,000) and another 15% of the valuation in CPF monies ($75,000).
Simply put, the figures to buy a 5 room Punggol flat is staggering.
Cash: $75,000
CPF: $75,000
Repayment for 25 years (Assuming 3% interest rate for prudence sake): $2,133.92 monthly.
Assuming the house needs renovation, the cash outlay would increase by another $30,000 to $50,000.
Is it worth it for such a location? What if 25 years do not go by trouble free? Can you rent the property out? Is it worth it to pay so much COV for a property?
Many Singaporeans fail to understand the purpose of the valuation. It is the market value which financial institutions will base the property upon. Paying COV means that you think that the market is wrong about the value about the property you are buying. You indirectly are telling the valuer, "Hey! You got this wrong!"
In essence, those who paid high COV figures for HDB flats in suburban areas got it terribly wrong.
Pricing is always about demand and supply. I remembered not too long ago, I could count the number of models for brand new HDB Build-To-Order (BTO) flats in HDB Hub with the fingers on the palm of one hand. Today, the BTO models are over crowding HDB Hub. There is insufficient space such that they had to clear a reception counter and even seats near the enquiry desks to place the models. I assume that there are more than 30 BTO models in HDB Hub. Where are all these situated? In places like Punggol, Jurong, Hougang, Tampines. The cost of a 4 room flat can be as low as SGD $200-plus thousand.
Like they always say. A picture says a thousand words...
Now who paid $500-plus thousand for a Punggol flat?
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
