Recent reports reveal one out of three buyers in Housing Board resale flats preferred paying an amount above-market valuation in the current year. Note that this range was one out of five in the previous year.
It is observed that this rise occurred as a result of the backdrop of few steadily rising prices in the HDB resale flat category.
As per the figures released from the Ministry of National Development, the median cash over valuation, which is paid by the buyers, was restricted to $0 per year for a long time. But a large proportion of buyers that paid increased cash over valuation price reflected the ongoing broad-based demand for the housing properties. It also included the private housing market that is widely supported by the low-interest-rate environment.
The cash over valuation occurs when the resale flats get a selling price much above their actual HDB valuation. And this difference can be paid in cash by the respective house buyers.
In case if the sellers and buyers agree on the resale price, which is exactly the same as that of the market valuation of the flat, there is no need to pay cash over valuation to buy the flat.
Ranging from January month of the previous year to the April month of the current year, less than one out of four resale flat buyers have paid above the existing market valuation rate for these HDB flats. Other than this, almost 6 out of 10 buyers paid cash overvaluation of around $20,000; however, the remaining four preferred paying higher than $20,000.
During the 16-month period, almost 34600 resale flats were sold. Out of these sales, 8600 buyers preferred paying cash over valuation; however, 3400 out of these paid even more than the cash over valuation amount of $20,000.
Whether the cash over valuation of $20000 is high or low, it mainly depends upon the base price. It may appear a reasonable amount for $1 million flat, but for a $300,000 flat, this seems quite substantial. Experts also state that they require widespread data to analyze whether the cash over valuation amount was higher in these sales and how many buyers or sellers were actually affected by this scenario. It is believed that the number of buyers that paid cash over valuation may increase by a considerable level if the time frame for this evaluation started from the third quarter instead of the first quarter.
This is just because the resale market still appears in the sleep mode, whereas the resale prices have started accelerating during the third quarter of the previous year.
The professionals also noted that the HDB resale transactions were executed o the basis of a willing seller, willing buyer strategy. In this case, prices are negotiated and finalized with the mutual understanding of both parties. It helps to decide the resale price for HDB homes with ease. Buyers are advised to check the reference points for resale properties to ensure a better purchase experience.
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