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6 Oct 2013

Zero COV transactions on the rise: SRX

Source; Channel News Asis
By: Lip Kwok Wai & Olivia Song

The number of resale flats that have been sold without a cash premium (cash-over-valuation or COV) in July and August has exceeded the numbers seen in the first and second quarters of 2013.

According to the Singapore Real Estate Exchange (SRX), there were 111 zero COV transactions in the third quarter, excluding September -- that is almost triple the number seen in the first quarter of this year (38 zero COV transactions). There were 77 of such transactions in the second quarter.

SRX data also showed that four-room resale flats saw the most number of zero COV transactions from January to August out of all the flat types -- with 82 cases recorded. There were 67 three-room flats and 57 five-room units transacted at zero COV during the same period.

Property analysts said the increase is a sign that measures like the total debt servicing ratio are taking effect.

While SRX did not reveal the number of resale flats sold below valuation, some property analysts expect there to be more of such cases in at least the next two quarters.

Ku Swee Yong, CEO of International Property Advisor, said: "We'll definitely see in the next two quarters at least, more and more cases of negative COVs. And when negative COV transaction data adds up, then the authorities will be adjusting the value, and so valuations will start to go down.

"When valuations start to go down, then Cash-Over-Valuations being negative will actually be reduced. So 12 months from today, I believe overall market COV may turn out to be plus minus zero, but with the value trending down by five to 10 per cent."